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Equal Credit Opportunity Act (ECOA)

ECOA and You


The Equal Credit Opportunity Act (ECOA), passed by Congress in 1975, prohibits discrimination in a mortgage credit transaction on the basis of sex, marital status, race, color, religion, national origin, age, receipt of public assistance benefits, and/or the borrower's good faith exercise of rights under the Consumer Credit Protection Act. Lenders may not discriminate in mortgage lending activities based upon any of these factors, which are called prohibited bases.

Equal Credit Opportunity Act (ECOA)also requires that lenders notify mortgage applicants that they have a right to receive a copy of the property appraisal used by the lender in the loan process. If the lender routinely provides copies of such appraisals without the applicant requesting it, this notice is not required.

Equal Credit Opportunity Act (ECOA) establishes rules for requesting information and using information during the loan application process. The restriction on information that may be asked is generally the first Equal Credit Opportunity Act requirement faced by a lender during the application process. For example, regarding discrimination on the basis of sex or marital status, Equal Credit Opportunity Act (ECOA)

  • prohibits questions regarding birth control practices or child-bearing intentions;
  • specifies how to evaluate the credit history of accounts on which both spouses are contractually liable;
  • permits applicants to apply for individual or joint credit;
  • regulates consideration of alimony and child support payments and the discounting of part-time or spouseís income;
  • allows the applicant to use his or her surname at birth, or that of the spouse, or a combination thereof;
  • limits inquiries as to marital status;
  • requires all terms in loan application forms to be neutral as to sex;
  • requires credit history information to be reported in the names of both spouses when both spouses are contractually liable on the account.

Equal Credit Opportunity Act (ECOA) contains other detailed provisions that must be followed when taking a mortgage application. Since the taking of an application triggers several Equal Credit Opportunity Act (ECOA) requirements, it is important that lenders and brokers define ďapplicationĒ in written loan policies and make sure all employees adhere to the policy.

Although the lenderís definition will have a bearing upon its ECOA compliance, a loan application will either be an oral or a written request for extension of credit. A fine line separates a customerís inquiry about a loanís terms and availability and a customerís application for a loan.

Under Equal Credit Opportunity Act (ECOA), the loan originator is encouraged to provide information about loan products to potential customers, but he or she must not offer an opinion about whether someone is likely to receive approval on a loan request. If such an opinion is given, regardless of the lender's or brokerís policy, under ECOA an application has been made, and the lender or broker must respond to it and comply with the Equal Credit Opportunity Act (ECOA) notification and documentation requirements. Loan originators can provide basic information on types of loan products, but they must be careful not to make a decision based upon the inquiry. Instead they should encourage the individual to make an application according to the lenderís written policy.

Equal Credit Opportunity Act (ECOA) prohibits any lender or mortgage broker from discouraging or prohibiting anyone from seeking or pursuing a loan application on a prohibited basis (race, sex, age, etc.). It is a safe policy to allow any interested inquirer to make an application.

When a lender denies an application for a mortgage loan, the applicant must receive a written notice of the denial. This notice, called an adverse action notice, must contain a statement that the loan was denied, a statement summarizing the requirements of Equal Credit Opportunity Act (ECOA), and either a statement of the specific reasons for the denial or a statement that the applicant may receive the specific reasons upon request.

Equal Credit Opportunity Act (ECOA) requires that lenders maintain monitoring information on all applications for the purpose of purchasing or refinancing a principal dwelling. This information includes race, sex, marital status, and age. If a lender must keep monitoring information under another regulation (such as HMDA) that regulatory program can substitute for the lenderís compliance with this Equal Credit Opportunity Act (ECOA) requirement.

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