According to the FTC’s complaint, Golden Empire Mortgage charged Hispanic home buyers higher prices for mortgage loans than non-Hispanic white home buyers - prices which could not be explained by the applicant's credit characteristics or underwriting risk. The FTC seeks to bar future violations and obtain redress for consumers.
“Mortgage lenders must ensure that pricing discretion does not lead to illegal pricing discrimination,” FTC Chairman Jon Leibowitz said. “The FTC will continue to enforce the fair lending laws so that American borrowers are treated equally based on their credit – not their race, national origin, or gender.”
Golden Empire Mortgage, according to the FTC, also gave loan officers and branch managers wide discretion to charge, in addition to the risk-based price, “overages” through higher interest rates and higher up-front charges.
Then the mortgage company passed along a percentage of these overages to loan officers as commissions, without monitoring whether Hispanic borrowers buyers were paying higher overages than non-Hispanic white borrowers. Essentially, the loan offers received an incentive to discriminate.
The complaint alleged that the company’s policy and practice of allowing loan officers to charge discretionary overages resulted in Hispanics being charged higher prices because of their national origin – price disparities that are “substantial, statistically significant, and cannot be explained by factors related to underwriting risk or credit characteristics of the applicants.”
The ECOA prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or whether you get public assistance. Creditors may ask you for most of this information in certain situations, but they may not use it when deciding whether to give you credit or when setting the terms of your credit. They are never allowed to ask your religion. Everyone who participates in the decision to grant credit or in setting the terms of that credit, including real estate brokers who arrange financing, must follow the provisions of the ECOA.
If you are looking for a mortgage, by law, lenders must:
- consider reliable public assistance income the same way as other income.
- consider reliable income from part-time employment, Social Security, pensions, and annuities.
- consider reliable alimony, child support, or separate maintenance payments, if you choose to provide this information. A lender may ask for proof that you receive this income consistently.
- accept someone other than your spouse as a co-signer if one is needed. If you own the property with your spouse, he or she may be asked to sign documents that permit you to mortgage the property.
But lenders cannot:
- discourage you from applying for a mortgage or reject your application because of your race, color, religion, national origin, sex, marital status, age, or because you receive public assistance.
- consider your sex, race, or national origin, although you will be asked to disclose this information voluntarily to help federal agencies enforce anti-discrimination laws. A creditor may consider your immigration status and whether you have the right to remain in the country long enough to repay the debt.
- impose different terms or conditions on a loan — like a higher interest rate or bigger down payment — based on your sex, race, or other prohibited factors.
- consider the racial composition of the neighborhood where you want to live. This also applies when the property is being appraised.
- ask about your plans for having a family, although they can ask questions about expenses related to your dependents.
- use discriminatory factors when refusing to purchase a loan or when setting different terms or conditions for the loan purchase.
- require a co-signer if you meet the lender’s standards.
Take action if you think you’ve been discriminated against:
- Complain to the lender. Sometimes you can persuade the lender to reconsider your application.
- Check with your state Attorney General’s office (www.naag.org) to see if the creditor violated state laws: Many states have their own equal credit opportunity laws.
- Consider suing the lender in federal district court. If you win, you can recover your actual damages and be awarded punitive damages if the court finds that the lender’s conduct was willful. You also may recover reasonable lawyers’ fees and court costs. Or you might consider finding others with the same claim, and get together to file a class action suit.
- Report any violations to the appropriate government agency. If your mortgage application is denied, the lender must give you the name and address of the agency to contact.