C1 S6 Unit 3: Federal Fair Lending Laws

The CRA requires lenders to serve their communities first by

1. Meeting the deposit and credit needs of their low-income and moderate-income housing communities 2. Investing in development and rehabilitation efforts that will enable low- and moderate-income individuals and families to afford a home 3. Participating in loan programs for housing, small businesses, and small farms

ECOA violations

1. The lender changes its story after meeting a client face-to-face after telephone conversation approval. 2. There is any indication that the loan is denied based on personal status. 3. The lender made slanderous or inappropriate protected class statements. 4. An individual who meets the lender's advertised approval requirements is denied or higher interest rates are quoted.

Identify whether each of the actions is allowed or not allowed under the Equal Credit Opportunity Act. Alessandra is 16 and was denied credit because she is too young.

Allowed

Identify whether each of the actions is allowed or not allowed under the Equal Credit Opportunity Act. Darlene applied for a mortgage loan and was asked if she would be relying on her spouse's income to repay the debt.

Allowed

What is a red flag for an Equal Credit Opportunity Act violation? A. An applicant was denied a loan because of a low credit score. B. A person was denied credit without explanation or given resources that explain why. C. The interest rate was not listed on the application. D. The lender only offered one financing option.

B. A person was denied credit without explanation or given resources that explain why.

What's the purpose of the ECOA? A. To increase employment B. To prevent discrimination in lending C. To prevent discrimination in transportation D. To simplify credit card applications

B. To prevent discrimination in lending

What's the name of a discriminatory lending practice whereby lenders limit the scope of their loans to exclude neighborhoods with certain ethnic or economic characteristics? A. Blockbusting B. Credit reporting C. Mortgage applications D. Redlining

D. Redlining

The Community Reinvestment Act requires lenders to invest in development and ______ efforts that will enable low- and moderate-income individuals and families to afford a home. A. Enforcement B. Policy-making C. Regulation D. Rehabilitation

D. Rehabilitation

Regulation B specifies that even those with no income and a low credit score must be granted credit if they live in inner-city areas. True or False

False Regulation B specifies that credit should be available to all financially qualified applicants and not be denied based on age, race, color, religion, sex, national origin, marital status, or public assistance income.

What should consumers do if they have been discriminated against for credit purposes?

File a complaint with HUD or initiate a civil suit. (In cases involving a pattern or practice of discrimination in home mortgage or home improvement loans, the Department of Justice can file a lawsuit under both the Fair Housing Act and ECOA)

Explain the Community Reinvestment Act (CRA) of 1977

Introduced to reduce discriminatory lending practices against individuals and businesses in low- and moderate-income neighborhoods

Identify whether each of the actions is allowed or not allowed under the Equal Credit Opportunity Act. Joe applied for a mortgage loan and was charged a higher interest rate because he receives public assistance.

Not Allowed

Identify whether each of the actions is allowed or not allowed under the Equal Credit Opportunity Act. Manuel was denied a mortgage loan and not provided a reason for the rejection

Not allowed

Indicate whether each of these is required by the CRA. Lenders must make high-risk loans that jeopardize their financial stability.

Not required

Purpose of The Equal Credit Opportunity Act (ECOA) of 1974

Purpose of preventing lenders from discriminating against applicants based on age (the legal age to sign a contract is 18), race, color, religion, sex, national origin, marital status, or public assistance income

Indicate whether each of these is required by the CRA. Lenders are periodically reviewed by federal agencies for compliance.

Require

Indicate whether each of these is required by the CRA. Lenders must post their lending policies.

Required

Explain the 1975 Home Mortgage Disclosure Act (HMDA)

Seeks to address discriminatory lending practices like redlining. he Consumer Financial Protection Bureau (CFPB) is responsible for HMDA. Requires lenders to maintain, report, and disclose data for the purposes of showing whether the needs of the neighborhoods and communities are being met and assist in identifying discriminatory lending practices.

he Consumer Financial Protection Bureau (CFPB) regulates what?

The ECOA through Regulation B, which specifies that applicants for credit be judged only on their creditworthiness (income, debts, credit history). All individuals who participate in granting credit must follow the rules set forth in the act, including real estate professionals who arrange financing.

Does This Violate the ECOA? Jane and Charley are very upset. They just received a letter from a lender stating that their application for a mortgage loan has been denied. No specific reason was given for the rejection, but the letter stated that they did not meet the lender's minimum standards. Jane and Charley are left wondering if it was because their combined income was too low, or because Jane has only been at her current job a short time. Has the lender violated the Equal Credit Opportunity Act?

You're right. Lenders must notify applicants of the specific reasons for credit denial