Processing Your Loan Application
There are several federal laws which provide you with protection during the processing of your loan. The Equal Credit Opportunity Act (“ECOA”), The Fair Housing Act, and the Fair Credit Reporting Act (“FCRA”) prohibits discrimination and provide you with the right to credit information.
No Discrimination: ECOA prohibits lenders from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, the fact that all or part of the applicant’s income comes from any public assistance program, or the fact that the applicant has excercised any right under any federal consumer credit protection law. To help government agencies monitor ECOA compliance, your lender or mortgage broker must request certain information regarding your race, sex, marital status and age when taking your loan application.
The Fair Housing Act also prohibits discrimination in residential real estate transactions on the basis of race, color, religion, sex, handicap, familial status or national origin. This prohibition applies to both the sale of a home to you and the decision by a lender to give you a loan to help pay for that home. Finally, your locality or state may also have a law which prohibits discrimination
Frequently, there are differences in the types and amounts of settlement costs charged to the borrower—for example, some borrowers are charges greater fees for mortgages depending on their credit worthiness. These differences may be justified or they may be unlawfully discriminatory. It is important that you examine your settlement documents closely, especially lines 808-811 on the HUD-1 settlement statement, and do not hesitate to compare your settlement costs with those of your friends and neighbors.
If you feel you have been discriminated against by your lender or anyone else in the home buying process, you may file a private legal action against that person or complain to a state, local, or federal administrative agency. You may want to talk to an attorney; or you may want to ask the federal agency that enforces ECOA (the Board of Governors of the Federal Reserve System) or the Fair Housing Act (HUD) about your rights under these laws.
Prompt Action/Notification of Action Taken: Your lender or mortgage broker must act on your application and inform you of the action taken no later than 30 days after it receives your completed application. Your application will not be considered complete, and the 30 days will not begin, until you provide your lender or mortgage broker all of the material and information requested.
Statement of Reasons for Denial: If your application is denied, ECOA requires your lender or mortgage broker to give you a statement of the specific reasons why it denied your application or tell you how you can obtain such a statement. The notice will also tell you which federal agency to contact if you think your lender or mortgage broker has illegally discriminated against you.
Obtaining Your Appraisal: The lender needs to know if the value of your home is enough to secure the loan. To get this information, the lender typically hires an appraiser, who gives a professional opinion about the value of your home. ECOA requires your lender or mortgage broker to tell you that you have the right to get a copy of the appraisal report. The notice will also tell you how and when you can ask for a copy.
