Home Buying, Credit, & Financial Literacy

Fair housing laws apply to the purchase of real estate, just as it does to rentals and home insurance. Sales agents, lenders, appraisers, owners, homeowners associations (including condo associations and floating or manufactured home park owners and managers) all must comply with fair housing laws.

At the Fair Housing Council (FHCO), we're not only interested in protecting fair housing rights in purchase transactions, but also in educating housing consumers and expanding homeownership for all regardless of race, color, national origin, religion, gender, familial status, disability, marital status, source of income, etc. in accordance with the letter and spirit of federal, state, and local fair housing laws.

The following are examples to help you understand your rights and help you understand what fair lending discrimination might look like for the different protected classes:

  • You know you qualify for a standard loan but you are told that you don’t qualify for a “conventional” loan and you are offered a loan that charges you a higher interest rate;
  • You are denied the opportunity to receive information over the phone until you prove you are “legal” or provide your social security number. You are told that you will only qualify for a loan if you pay additional “points” or fees;
  • A loan officer asks you questions about religion or could tell you had a different religion based on the way you were dressed;
  • You are told you can’t apply for a loan while you are on maternity leave;
  • You are informed an insurance company will not insure a home until a woman “returns” to work even if she is on paid maternity leave;
  • A loan officer discourages you from getting a loan because it’s expensive for your growing family;
  • A loan officer asks questions about your marital status and/or asks if you plan to have children;
  • A loan officer says that you can’t use your disability payments to qualify for a loan because you can’t prove that you will continue to receive income.

What Can You Do?

  • Contact a HUD approved housing counselor. Go to www.hud.gov.
  • Keep records of all documents from banks or servicers – notes, notices, receipts, phone messages, contracts, letters, etc.
  • Get names and numbers of people involved.
  • A bank or servicer of a loan is required to dedicate personnel to assist you by phone.
  • Get numbers – date of the incident, address where it happened, costs.

Uniform Residential Loan Application

The Fair Housing Council (FHCO) has selected the Uniform Residential Loan Application to use as a sample loan application because it is the standard form used for all Fannie Mae and Freddie Mac conforming, FHA, and VA loans.

What to Expect When Applying for a Mortgage

Your lender may accept your application during a face-to-face appointment, over the telephone, through the mail, or via the internet. S/he should complete all blanks and attach any separate exhibits, details, statements, or addenda that are needed to underwrite (http://en.wikipedia.org/wiki/Underwriting) the mortgage. You will be required to sign the original application at the time it is completed or as soon as possible thereafter; an electronic signature or facsimile is acceptable.

Never sign an application or legal document with blanks not filled in or “scratched out” as unscrupulous individuals could alter the document without your knowledge, making it look as if you had signed it with the information s/he had added.

Your lender should retain the original application with any supporting documentation; you should get a complete copy. Before or at closing (http://www.escrowhelp.com/qanda-1.html) you will be required to sign the final application your lender prepares based on his/her verification of the information you provided in the original application. You should read and review the final application carefully. Be certain that you thoroughly understand it before signing it and that all of the information is accurate. Again, be sure you get a complete copy.

Beware of Predatory Lending

Most lenders are honest, but there are some who may employ “predatory lending practices” which victimize and cause harm to uneducated borrowers. Predatory lenders can use their knowledge about how loans are structured to your disadvantage. They target people with low incomes or those assumed to have poor credit, including racial and ethnic minorities as well as seniors and individuals with disabilities.

Loan officers making these loans often use high-pressure tactics and charge considerably more than reasonable interest rates. In addition, sometimes predatory lenders intentionally lend more than the homebuyer or homeowner can afford to pay back and/or do not fully disclose the loan terms and costs, as required by law — two tactics that put homeowners at risk of losing their home.

Another predatory loan practice is to sell one loan product but have paperwork for a different loan product at the closing table—an example of a “bait and switch” tactic. Buyers either do not catch the difference, or if they do, feel pressured to accept the new terms or risk "losing the loan," loosing any prepaid costs, and missing out on purchasing the house of their dreams. How does the loan officer explain this change? Usually the excuse is that the lender changed their mind, which may or may not be true.

Sometimes the terms of the loan are changed without disclosure; hence the vital importance that you know how to read your HUD-1 Settlement Statement and understand everything on it before committing yourself to a loan by signing the note and trust deed. Learn more about predatory loans online at http://www.oregondfcs.org or call (866) 814-9710.

Another potentially unscrupulous practice used by some loan officers involves what is known as a Yield Spread Premium or mortgage “broker rebate." A Yield Spread Premium is a "rebate" given to a mortgage broker at the "back end" of a loan transaction in exchange for originating the loan at an interest rate higher than the prevailing market rate. These rebates can amount to several thousand dollars. This can provide an incentive for an unscrupulous loan office to originate the loan at an interest rate much higher than is necessary.

"Shop around," that is, call banks yourself for terms and costs; talk to with your credit union if you are a member; talk to more than one mortgage broker. You should also educate yourself on the difference between loan originators who work for a single lender and those who work with several lenders without affiliation. The second group may appear to be a better choice, but sometimes they are not! With regard to the topic of Yield Spread Premiums specifically, following are some questions you should ask:

  • Are there any Yield Spread Premiums involved with any loan program you are presenting to me? If so, how much (in dollars) are the rebates?
  • Is it possible to get a lower interest rate that does not have any Yield Spread Premium attached to it?
  • Would you be willing to show me the "wholesale" rate sheets so that I can see the various interest rates and Yield Spread Premiums? NOTE: brokers currently are not required to show these rate sheets.