Buying property will likely be one of the biggest decisions of your life. Because of this, it can also be extremely stressful. Mortgage loan issues can make matters worse. Discrimination when trying to finance a home can make the experience unpleasant. It is illegal to show discrimination towards applicants for reasons such as their race, sex, disability, etc. Here, I will discuss some reasons for discrimination in mortgage lending and what to do about it.
The Credit Issue
After the housing collapse of 2008, mortgage lenders clamped down on the loans that they were giving out. Lenders became even more obsessed with credit when approving or denying a loan.
The problem with this tactic is that minorities tend to have lower credit scores than white people. Lenders oftentimes denied minorities on the basis of their credit, or approved loans at ridiculous prices. High fees, teaser interest rates, balloon payments, and fee packing became common when approving loans for minorities. Higher mortgage rates are also a big issue among minorities.
Luckily, many of these issues were reduced through new legislation passed after the market collapsed. For example, the Dodd-Frank regulations directly addressed the issues listed above to make mortgage lending fairer for all applicants. While the Dodd-Frank regulations have helped the situation, they have not fixed all problems. High interest among minorities still persists.
In addition to the Dodd-Frank regulations, there is the Fair Housing Act. This act makes it illegal to discriminate against someone looking to rent, buy, or sell property based on their:
- Place of origin
- Family status
More directly, the Equal Credit Opportunity Act makes it illegal to discriminate based on these factors listed above when it comes to credit.
You can attempt to avoid discrimination in a few different ways. One good option is to visit multiple mortgage lenders before making your decision. You can shop prices and get a feel for what is appropriate and when you are being taken advantage of. Eventually, you will likely find a mortgage loan that works for you.
If you still have trouble finding a suitable loan, you should contact an attorney. An attorney can help you file a complaint with the Housing and Urban Department (HUD). Generally, the threat of this complaint can be enough to get a lender to give you a fairer deal.
Of course, you need to make sure that you are a good candidate for a loan. Make sure that you talk to a lawyer about your options and if filing a complaint is an appropriate measure to take.