Processes – Products – Pricing
The 3 P’s you need moving forward. We can help you find them.
It’s illegal to discriminate
Question. Would you agree that a Mortgage Loan Originator (or Government Agency) cannot be compliant with the Federal Equal Credit Opportunity Act when writing underwriting and funding a mortgage while simultaneously writing a silent second mortgage that had explicit language that discriminates on the basis of race. Agreed? That would be illegal. Now in case you’re uncertain, here is the equal credit opportunity act.
The Equal Credit Opportunity Act [ECOA], 15 U.S.C. 1691 et seq. prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, because an applicant receives income from a public assistance program, or because an applicant has, in good faith exercised any right under the Consumer Credit Protection Act.
To sum it up, it’s illegal to discriminate. Period. Now in case you’re still hazy about when it’s okay to discriminate, let’s see what HUD has to say via Fair Housing. Verbatim, exactly as written via fair housing and HUD.
Prohibited practices
The Fair Housing Act prohibits discrimination in housing because of: Race, Color, National Origin, Religion, Sex (including gender identity and sexual orientation), Familial Status or Disability.
Are there any gray areas? Maybe. What does the CFPB have to say about discrimination? They follow ECOA and reg B in particular. What does that say?
Prohibited Practices. Regulation B contains two basic and comprehensive prohibitions against discriminatory lending practices (section 202.4): • A creditor shall not discriminate against an applicant on a prohibited basis regarding any aspect of a credit transaction.. In addition, a bank may not use pre-screening tactics likely to discourage potential applicants on a prohibited basis. Instructions to loan officers or brokers to use scripts, rate quotes, or other means to discourage minority applicants from applying for credit are also prohibited.
Meanwhile in San Diego
The San Diego Housing Commission has a pilot program called BIPOC that has a 20K deferred silent second at a rate of 1.5% with a possible additional 20K Grant for homes up to 1.25M for incomes up to 150% of area median. Great Loan! By the way, the loan, hence the namesake, is intended only for black, indigenous and people of color. Verbatim exactly as they have written it.
Now, I get the goal, I get the objective, but how is this intellectually credible with all and I mean all the laws that are written and in some cases, rigorously enforced. How does this slide? Reg B says a bank may not even use pre-screening tactics that might potentially discourage an applicant from applying. What is more blatant pre-screening than the actual name of this program?
A direct contradiction
All I’m saying is this; change the laws to reflect the reality that it is okay to discriminate sometimes. You may think this program is just warranted and in the best interest of everyone, as it may be…. And that very well may be the case. It does not reflect any law, regulation or guideline that the mortgage industry so rigorously enforces. This program’s broad acceptance is behavior that contradicts what the industry claims to believe or support. A direct contradiction to our beliefs. That by the way, is the definition of a hypocrite, verbatim, exactly as it is written.
