ECOA Flashcards
ECOA stands for:
Equal Credit Opportunity Act
1974
ECOA = Regulation
Regulation B
ECOA Factors that CANNOT be used to discriminate:
- Race
- Color
- Religion
- Sex
- National Origin
- Marital Status
- Age
- Right to receive public assistance
- Exercising rights to ccpa
SAM NECRRR
ECOA Permissible Acts
Information that is acceptable to be questioned under the act include:
- immigration status
- permanent residency
- credit history
- make not ask if a client is receiving child support or alimony (can ask is there any other source of income you want to disclose to me?)
- can’t ask how many kids do you have or want to have (can ask “how many dependents do you have”)
ECOA circumstances when it is acceptable to deny credit/loan:
Acceptable reasons are related to the applicant’s inability to display creditworthiness but may also be related to the proposed property. Common circumstances for denial may include:
- poor credit history
- insufficient assets
- proposed property having unfavorable characteristics
- lack of employment history
- poor credit score
- immigration status
What are the only 2 reasons to consider applicants age?
- Old enough to apply for credit
2. 62 + for reversed mortgage applications
Cannot ask a borrower if single, divorced or widowed. But instead ask:
Unmarried
Married
Separated
Definition of “Elderly”
62 or older
Requirement for a co-signer
- Cannot require a co-signer
- Borrower may choose one on their own.
- Can only discuss spouse if spouse is part of transaction OR if community property state OR alimony or child support is a qualifying source of income.
Creditworthiness Factors
Collateral - (home)
Capacity (ATR ability to repay - DTI - Income)
Capital - ( net worth/Assets)
Character - (Willingness to repay - Credit)
Actions an MLO should take when a borrower refuses to provide ethnic, race or gender information:
If face-to-face and applicant does not provide information on ethnicity, race and gender the MLO must guess based on visual observation and surname and notate on the application that the borrower declined to answer. The box, “Did not wish to furnish” must be checked.
If the app is taken over the phone only “Did not wish to furnish must be checked” on the app.
Types of acceptable income considered in a loan review:
The ECOA requires the lender or mortgage broker to consider reliable sources of income such as part time, pensions, alimony, social security, public assistance and other. However, the applicant is not required to submit alimony, child support or separate maintenance as income.
Information required on application:
Besides the information needed to evaluate the creditworthiness of an applicant, the following information shall be provided to ensure lenders may be properly monitored so as to not fail to comply with ECOA:
ethnicity
gender
race
The providing of this information is optional. If the applicant does not provide, the lender must denote this for documentation purposes.
General Provisions of Regulation B:
-Intended to promote the availability of credit to all creditworthy applicants, regardless of race, color, religion etc.
Loan covered by ECOA:
-Applies to transactions for the extension of credit by any person who regularly extends, renews or continues credit.
What disclosure/ notification is required if the creditors’ application is approved?
Commitment Letter
Must be provided within 30 days of completed application
