◦ Mortgage lending discrimination is defined by federal and state statues.  Title VIII, 42 U.S.C. § 3605;  Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ f  The Civil Rights Acts of 1866 & 1870, 42 U.S.C. §§ (Sections 1981 & 1982)  Sections 1985 & 1986, 42 U.S.C. §§ 1985 & 1986  Various state and local civil rights statutes

Fair Housing Act Prohibits Discrimination in the Sale, Rental and Financing of Residential Real Estate

 RACE  COLOR  RELIGION  NATIONAL ORIGIN  SEX  FAMILIAL STATUS  HANDICAP (Disability)

 Unlawful refusal to sell, rent or negotiate  Unequal treatment in terms, conditions, or privileges  Failing to accept or consider a bona fide offer  Refusing to sell to or rent, or negotiate for the sale or rental of a dwelling

 Discriminatory advertisements, statements, or notices  Indicate through advertising any preferences or limitations  Imposing different sale prices  Misrepresentations on availability of housing

 Using different qualifications, criteria and standards  Providing different information, or promotional activity  Evicting any tenant on a protected basis or the characteristics of a tenants guests

 Using different policies, practices or procedures in determining a person’s eligibility  Using policies practices and procedures in an arbitrary and discriminatory manner, to reject a persons application or preapplication

 Steering Assigning a person to a particular lending channel on a prohibited basis  Discouraging inspections  A packager may not refuse to package an application

 Using codes or devices to segregate or reject persons  Refusing to show listings in certain areas  Denying or delaying the processing of an application

 It is unlawful to provide inaccurate or untrue information about the availability of dwellings for sale, rent or financing.

 Discrimination in the making of loans, grants, or other financial assistance  Discrimination in the purchase and packaging of loans  Discrimination in the terms and servicing of loans  Unlawful practices when selling, brokering, or appraisal of property as loan security

Equal Credit Opportunity Act Prohibits Discrimination in credit related transactions

14 Scope ◦ Race; ◦ Color; ◦ Religion; ◦ National Origin; ◦ Sex; ◦ Marital Status; ◦ Age; ◦ Receipt of public assistance income; and ◦ Good faith exercise of rights under the Consumer Credit Protection Act. ECOA prohibits discrimination in any aspect of any type of credit transaction on a prohibited basis, which includes: 12 C.F. R (z)

15  A creditor cannot do anything that would discourage (on a prohibited basis) a reasonable person from making or pursuing an application.

16  General Rule: The creditor cannot take a prohibited basis into account when evaluating an application.

17  General Rule: The creditor cannot take a prohibited basis into account when evaluating an application. ◦ Credit History: To the extent that a creditor considers credit history, the creditor must consider other information that the applicant presents that tends to indicate that the credit history being considered doesn’t accurately reflect the applicant’s creditworthiness. ◦ Immigration Status: A creditor can consider whether an applicant is a permanent resident of the U.S. and his immigration status.

18  A creditor must notify an applicant of action taken on his application. ◦ When approved, the notification of action taken can be express or implied. ◦ When declined, the notification must be in writing.

Complainant’s qualifications Review complainant's loan or application Loan programs Rate sheets Underwriting guidelines Comparative evidence Review comparable files, generally identified through HMDA Testing evidence Statistical evidence Marketing efforts Interviews and other information gathering Document any instances of direct evidence Confirm or refute reasons given by respondent lender for actions taken Anecdotal or other evidence of discrimination by lender

 Where does it occur? ◦ Origination; ◦ Servicing; and/or ◦ Collection of loans ◦ Foreclosure Rescue Schemes

 Simply: Mortgages are the loan that homeowners borrow from banks to purchase their homes  The homeowner pays a monthly amount that consists of both Principal and Interest.  The borrower pledges the underlying land as collateral for the loan  If the borrower fails to make re-payment, the mortgage gives the lender the right of foreclosure on the loan and therefore can seize the property  This can be viewed as an investment by the banks in the mortgage market – they are purchasing an asset that pays a monthly amount of Principal and Interest (P&I)  The banks often sell these assets to other investors to raise capital Home Owner Lending Institution Mortgage Funds =

 A number of similar mortgages (underlying collateral, design, rates and maturities) are combined into a single group  Mortgage documents associated with this group are delivered to a custodian and are assigned an identification (pool) number  A Mortgage Backed Security (MBS) is issued with a face amount equal to the cumulative outstanding principal balance of the mortgages (original balance)  The mortgages that have been pooled together serve as the collateral for the security  Most MBS are guaranteed and/or issued by a U.S. Government Agency (FNMA, Freddie Mac or GNMA) + + = Securitized Mortgage Pool or Pass-throughs

 Guiding Principles ◦ Include any loan or borrower characteristic that comes into play during the lending process ◦ Collect relevant evidence that will affirm or refute that discriminatory practice occurred. ◦ Identify maximum number of characteristics that can explain lending disparities

 Home Mortgage Disclosure Act Data  Comparable loan files  Testing evidence  Statistical evidence  Marketing efforts

I. Application Documents II. Borrower’s Qualifications III. Property Valuation IV. Lender's Working Papers (key records in conducting a file review) V. Adverse Action (if present, also a key record in a file review) V. Notices VI. Closing Documents

 Assess Changes in Lending Environment ◦ Review policies and guidelines to check for any changes over the quarter ◦ Rate sheets ◦ Exception policies ◦ Organization of lending regions ◦ Changes to pricing engines ◦ Pricing specials

 Document any instances of direct evidence  Anecdotal or other evidence of discrimination by lender  Affirm or refute reasons given by respondent lender for actions taken

Complainant’s qualifications Review complainant's loan or application Loan programs Rate sheets Underwriting guidelines Comparative evidence Review comparable files, generally identified through HMDA Testing evidence Statistical evidence Marketing efforts Interviews and other information gathering Document any instances of direct evidence Confirm or refute reasons given by respondent lender for actions taken Anecdotal or other evidence of discrimination by lender