Rules to Live By
In keeping with this spirit of ensuring fairness, laws have been enacted that affect not only people like me whose business involves the lending of money, but also you when you seek to borrow money. I bring this up since most people, I believe, are unaware of the rules and their protected rights when it comes to applying for a loan.
Who is impacted? People who belong to a specific sex, have a certain age, are of a particular race or national origin, are married, unmarried or separated, have a color to their skin or belong to any religion. If you have any of these characteristics you fall under what is termed a “protected group” and cannot be discriminated against. Surprised?
Yet, there was a time when, until the 1970s, there were many examples of unfair lending in America:
Real estate handbooks of the 1930s ranked races and nationalities with respect to their beneficial effect on land values
Appraisers were instructed to report racial and ethnic characteristics (coding) to lenders
Female heads of households could not obtain a mortgage without a male co-signer
Married women could not obtain credit in their own names
Revolving credit accounts were automatically revoked when customers reached the age of 65
In response, Fair Lending Laws have been instituted. They include the Federal Housing Act (FHA) in 1968, followed by the Equal Credit Opportunity Act of 1974. The purpose is to:
Make it unlawful for a financial institution to discourage anyone from applying for a loan
Discriminate on a prohibited basis against any loan applicant
When required, you must collect specific government monitoring information
That’s to make sure that all creditworthy consumers have an equal and fair opportunity to get credit.
These restrictions apply to all creditors such as banks, credit unions, finance companies and department stores that offer their own credit cards. They generally cover consumer loans and loans which are secured by a primary residence.
The specific prohibited discrimination bases include race, color, religion, national origin, handicap, familial status, sex, age, marital status and receipt of public assistance.
Since these factors cannot be used in the credit evaluation process, I cannot ask them while gathering information on which to base my credit decision. But as a mortgage lender the government wants to make sure that I am not discriminating on prohibited bases.
I am therefore required to ask for “government monitoring purposes” your sex, national origin and race. If you don’t want to tell me I will have to guess based upon my observation and your surname. Although this requirement seems to contradict the prohibition against requesting certain pieces of information, it is only to be collected by us for the government and is not to be used in order to evaluate the application.
One item I can never ask about is your plans to have children, so when I don’t ask it’s not because I don’t care!
So there’s a lot at stake when you inquire about a loan. Maybe you’ll be in a position to say … You can’t ask me that!
Neil Funsch has been a mortgage broker for 18 years, the last four in Park Hill. He can be reached at 303-229-2684 or neil.funsch@gmail.com.