Mortgage Applicants Protected Against All Forms of Discrimination

All lenders that originate residential mortgages must comply with The Equal Credit Opportunity Act. ECOA is a federal law that ensures that all consumers are given an equal chance to obtain credit. The ECOA, also known as Regulation B, prohibits discrimination in granting credit to people based on the following:

1) Sex 2) Age 3) Marital Status 4) Race 5) Color 6) Religion 7) National Origin 8) Receipt of public assistance 9) Exercised rights under the Consumer Credit Protection Act

The law protects a borrower against any creditor who regularly extends credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions. Anyone involved in granting credit, such as real estate brokers who arrange financing, is covered by the law. Businesses applying for credit also are protected by the law.

The law was originally passed in 1974 to prohibit lending discrimination on the basis of sex or marital status. This law led to, among other things, the requirement that credit bureaus maintain separate credit files on married spouses, if so requested. The law ensured that women received the same consideration by lenders when applying for credit. The law was extended in 1976 to include all of the protected classes listed above. Most notable among the law's revisions is prohibiting the discrimination against a potential borrower on public assistance.

To comply with ECOA, lenders may not ask interested borrowers of their marital status. Nor can they ask a borrower about their spouse unless it is a joint application or the applicant is relying on their spouse's income, or alimony or child support from a former spouse to qualify for the loan. When the loan is secured by a mortgage, a lender may ask about a spouse only if they are doing business in a "community property" state, like New Jersey or Pennsylvania.

When evaluating a potential borrower's gross income, a creditor may NOT:

1) Refuse to consider public assistance income the same way as other income 2) Discount income because of sex or marital status 3) Discount or refuse to consider income because it comes from part-time employment or pension, annuity, or retirement benefits programs 4) Refuse to consider regular alimony, child support, or separate maintenance payments

While the Equal Credit Opportunity Act clearly indicates that a lender must consider reliable alimony, child support, or separate maintenance payments as income, the applicant is also not required to disclose such income. Furthermore, a loan officer may not discriminate against an applicant who exercises his good faith rights of nondisclosure of those sources of income.

Like most consumer protection laws, the ECOA is implemented by the Federal Trade Commission. Consumers who apply for credit and feel that they have been unjustly discriminated against may file a complaint with the FTC or each financial institution's regulatory agency. Civil lawsuits are also a viable option.