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Chapter 14 Fair Lending and Consumer Protection

Chapter 14 Fair Lending and Consumer Protection - Financing...

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Financing Residential Real Estate Lesson 14: Fair Lending and Consumer Protection
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Introduction In this lesson we will cover: federal fair lending laws, consumer protection laws that apply to mortgage lending, and the problem of predatory lending.
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Fair Lending Laws Residential mortgage loan transactions are subject to federal antidiscrimination laws, including: I Equal Credit Opportunity Act, I Fair Housing Act, I Community Reinvestment Act, and I Home Mortgage Disclosure Act.
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Fair Lending Laws Equal Credit Opportunity Act ( ECOA ) was passed in 1974 and applies to business and consumer credit. Consumer credit = credit extended to an individual for personal, family, or household purposes, including residential mortgage loans. Equal Credit Opportunity Act
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Equal Credit Opportunity Act ECOA prohibits discrimination against applicant based on applicant’s: race/color religion national origin sex marital status age Protected categories
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Equal Credit Opportunity Act Also prohibits discrimination against applicant who: receives income from public assistance program has exercised rights under federal credit laws Protected categories
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Equal Credit Opportunity Act Lenders must not discriminate when: I interviewing and communicating with credit applicants, I analyzing applicants’ finances, or I offering credit terms to applicants. Prohibited actions
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Equal Credit Opportunity Act Lenders may not discourage anyone from applying for loan. Credit guidelines must be applied to everyone in same manner. Illegal to make lending decisions based on stereotypes and assumptions about creditworthiness. Prohibited actions
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Equal Credit Opportunity Act As long as information isn’t used to discriminate, ECOA does permit lenders to ask about: age marital status number and ages of dependents Can’t ask about or make assumptions about childbearing plans, however. Permissible questions
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Equal Credit Opportunity Act Under ECOA, lenders have up to 30 days to inform applicants whether their completed application was accepted or rejected. And if the application is rejected, the lender must give a specific reason for the decision, and notify the consumer of their right to inquire further, within 60 days. Notifying applicants
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Fair Lending Laws Federal Fair Housing Act – 1968 Applies to transactions concerning one- to four- unit residential property, including mortgage lending transactions. Fair Housing Act
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Fair Housing Act Prohibits lending discrimination based on: race color national origin religion sex disability familial status Protected categories
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Fair Housing Act Under Fair Housing Act, lenders may not do any of the following for discriminatory reasons: I refuse to provide information about mortgage loans, I refuse to make a mortgage loan, or I impose different terms or conditions on a mortgage loan.
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