Why Is My Lender Asking About My Race on My Loan Application?

It may seem odd, but the government requests this personal information for two important reasons.

At some point in the mortgage application process, you’ll get asked questions about your race, ethnicity, gender, and age. Being asked to provide this information can often raise a question of your own: Why?

Let’s answer that question now.

Clearing up anti-discrimination laws

A law called the Equal Credit Opportunity Act (ECOA) enacted in 1974 makes it illegal for lenders to discriminate based on race, national origin, gender, age, marital status, or because one receives public assistance.

Another law called the Home Mortgage Disclosure Act (HMDA) enacted in 1975 requires lenders to collect, report, and disclose a long list of data about mortgages they originate, including each borrower’s race, ethnicity, gender, and age. This HMDA data helps regulators determine if lenders are serving the housing needs of their communities, identify possible discriminatory lending patterns, and assist public officials in making community housing investment decisions.

So ECOA says lenders can’t use race, ethnicity, gender, and age to make loan decisions. And HMDA says lenders must ask for race, ethnicity, gender, and age to monitor for discriminatory patterns.

How are these questions asked in the loan process?

A form called the Universal Residential Mortgage Application contains all of the borrower questions required by federal law.

Your age is obtained by requesting your date of birth.

Race, ethnicity, and gender are requested in a specific categorical format required by federal law.

The fine print of this section in a loan application contains three concepts that are especially important:

  • You are not required to provide this information, but are encouraged by the government to do so.
  • The law provides that a lender may not discriminate either on the basis of this information, or on whether you choose to furnish it.
  • If you’ve made the application in person and do not furnish ethnicity, race, or gender, federal law requires your lender to note the information on the basis of visual observation and last name.

You should also note that as technology streamlines your application process, these questions may not be asked or visually presented in this format — but they will be asked.

Changes to these questions coming soon

HMDA rules are enforced by the Consumer Financial Protection Bureau (CFPB), and the CFPB has already made new laws to improve HMDA data collection. The new laws go into effect on January 1, 2018.

It’s worth knowing about these changes now because lenders will be working toward these changes between now and January 2018.

Revised HMDA laws fine-tune requirements for lenders when collecting race, ethnicity or gender from borrowers who choose to furnish this information versus those who choose not to furnish it.

If a borrower chooses to provide race and ethnicity under the revised laws, they will get an expanded set of categories to select from.

However, if a borrower chooses not to provide race and ethnicity when applying in person, the lender must use the same categories while following the same visual observation and last name requirements they follow today.

The CFPB ruled  that allowing borrowers to self-identify using newly expanded categories and requiring lenders to identify (when borrowers choose not to) using today’s limited categories is the best balance of consumer protection and lender regulatory burden.

What to do if you feel discrimination has occurred

As you can see, our federal regulators think deeply about consumer protection, but no law is perfect at interpreting your individual loan experience.

If you are concerned about mortgage discrimination or believe you have been discriminated against, follow the CFPB’s complaint process, or call the CFPB at 855-411-2372.


Source: zillow.com

Mortgage Lending Surged 38% in 2012 on Refinance Strength

Posted on September 18th, 2013

Last year was a great year to be a loan originator. Next year probably not so much. This year, we’ll see.

In 2012, residential mortgage lending increased by an impressive 38%, compared to volume seen a year earlier, according to Home Mortgage Disclosure Act (HMDA) data released today by the FFIEC.

The agency said it compiled data on 15.3 million home loan applications during the year, of which 9.8 million resulted in loan originations (funded).

That’s an additional 2.7 million closed loans compared to figures in 2011.

The increase was driven by refinance loans, which experienced a 54% increase from a year earlier as mortgage rates flirted with record lows.

Home purchases were no slouch either, chalking a 13% year-over-year gain from 2011 as buyers cautiously fell back in love with real estate again.

Of course, not all types of lending experienced gains in 2012. The popularity of FHA loans continued to decline, with the gov loans snagging a 27% share of first-lien home purchase loans, down from 31% a year earlier.

The market share of FHA loans will probably continue to fall thanks to higher mortgage insurance premiums and insurance that stays in force for the life of the loan.

At the same time, the number of VA loans reported increased 11% from 2011, though their market share held steady at roughly eight percent.

85% of Those Who Refinanced Went the Conventional Route

While government loans continue to play a significant role in the home purchase market, it is conventional loans that continue to dominate the refinance market.

During the year, conventional loans accounted for 85% of all refinances, while FHA and VA loans held much smaller shares, at nine and six percent, respectively.

Still, conventional refis only increased about 51% from 2011 to 2012, while refis backed by the FHA or VA jumped 78% and 90%, respectively.

My guess is that the bulk of the FHA’s share came via its streamline refinance program, which has very few requirements for approval, allowing even those who are underwater to refinance.

CFPB Launches HMDA Data Tools

loan purpose

Number of applications & originations by loan purpose.

loan type

Number of originations by loan type.

The CFPB also released their own HMDA data today, with their focus on first-lien, owner-occupied one-to-four unit family and manufactured homes.

The newish agency noted that the surge in home loan refinance activity varied greatly by region.  For example, in Cincinnati, Ohio, refinance originations were up 47%, while Las Vegas saw a ridiculous 205% increase.

That variance is perhaps attributable to the number of HARP loans processed in Sin City as homeowners who were previously handcuffed by negative equity found a way out through the program.

The agency also revealed that VA lending was huge in metropolitan areas like Gulfport, Mississippi, where 21% of loans were VA, and Fairbanks, Alaska, where 29% of loans had a VA guarantee.

These regions of the country are dominated by military families that can take advantage of the generous lending policies offered by the VA.

In all, there were roughly 18.7 million HMDA records collected from 7,400 financial institutions last year.

Back in 2006, when the housing market was humming, data was gathered from over 8,900 banks, credit unions, and mortgage companies.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Source: thetruthaboutmortgage.com

Women pay higher mortgage rates in 49 states

In Mississippi, single women on average paid 3.47% on a 30-year, conventional fixed-rate mortgage in 2019. But single men on average paid 3.37%, according to the latest HMDA data available. Over the lifespan of the mortgage, the single woman in this instance will have roughly $7,000 more in mortgage payments than the single man.

Patrick Boyaggi, CEO and founder of Massachusetts-based lending startup OwnUp, says this issue hasn’t drawn enough attention in the mortgage space. His analysis of HMDA data found that women paid higher mortgage rates than men in 49 out of 50 states, the lone exception being Alaska (the analysis assumes that the loan size averaged $345,000 and the prime rate was 3.00%).

“The latest HMDA data makes it startlingly clear – women are largely being left out of the conversation,” Boyaggi said. “Recent HMDA data confirms that discrimination in the home-financing process is very real.
The main reason? Many female borrowers simply fail to shop around for the best possible rate, which translates into losing thousands of dollars over the total life of their loan.”

Boyaggi admits his analysis is not exactly revelatory – it’s been well documented that women pay higher mortgage rates, and the reasons for it are many and complex.

He said he didn’t intend to undertake a sociological study to determine all of the reasons women pay more. It’s more important to acknowledge there’s a problem and take action, he said.

Should lenders look to non-QM when the refi boom slows?

HousingWire recently sat down with Tom Hutchens, Angel Oak EVP of production, who shared how non-QM lending could be an effective way for lenders to replace lost business in the event of a refi boom slowdown.

Presented by: Angel Oak

“I am not certain everybody is aware of it or believes it’s a real issue,” Boyaggi said. “We believe it is a systemic-wide problem…women are not being treated fairly…For us, it’s really about it not being 50-50. And therefore, it’s a systemic problem. Let’s bring that to light first and let’s start worrying about the solutions versus trying to nitpick as to why it is an issue. It is an issue. We know it’s an issue. How do we make it better, versus trying to justify it or come up with some kind of rationale for it.”

According to Boyaggi’s analysis of HMDA data, the five states where women overpay most on a mortgage were Mississippi (delta of $7,077 over the course of the mortgage), Alabama (delta of $6,006), Ohio (delta of $5,856), Florida (delta of $5,591) and New Jersey (delta of $5,515).

Single women typically paid between 8 and 10 basis points higher on a mortgage. In Alaska, single women paid an average of 3.21% while single men paid 3.23%, Boyaggi found. The four other best states for women applying for mortgages were Maine, Wyoming, Montana and Oregon. Single women paid between 1 and 3 basis points more on mortgage rates in those states than single men.

An Urban Institute study from 2016 found that single women were better at paying their mortgages than single men, even though they paid higher rates. The study also found that single borrowers, particularly women, are more likely to be minorities, from lower-income areas, and they are more likely to have a mortgage that eats up a higher percentage of their income.

“One possible explanation is that women, particularly minority women, experience higher rates of subprime lending than their male peers,” the UI study said. “Another explanation is that women tend to have weaker credit profiles. We find that both these explanations are true and largely account for the higher rates.”

Though subprime lending has declined since the study’s publication, mortgage underwriting standards in general are much tougher since the financial crisis, and aren’t particularly flexible.

“There is somewhat of a plain vanilla, one-size-fits-all mortgage underwriting standard, and that’s not very good at accommodating minority borrowers in general, or anybody with any sort of a non-typical, non-generic credit profile,” Guy Cecala, CEO of Inside Mortgage Finance, told Wharton Business Radio in 2016. “Minority buyers in general are getting fewer mortgages than they did before. The good news is that they’re not getting subprime loans, because the subprime market has dried up completely, but they’re not getting mortgages at all in many cases.”

Asked if there could be a potential level of bias against women borrowers, Cecala said in the same interview, “I think there can be. The mortgage market prides itself on being color blind, and essentially using a black box, but any sort of black box basically discriminates against single borrowers, lower-income borrowers and borrowers with lower credit scores. If those happen to be predominantly women, you have to assume that they are getting that kind of treatment from the mortgage market.”

Boyaggi, whose firm Own Up helps consumers shop for mortgages and negotiates prices on their behalf, said more awareness simply needs to be raised.

“There’s a lot of things that happen in this industry where if you just looked at it you’d be like, ‘Oh 10 basis points, .010%. What are we talking about?’” he said. “But if you were to say, ‘Hey, this gas station charges women 10 cents more than men,’ we would be in an uproar. There would be stories about it everywhere, right? People would vilify that gas station, and rightly so.”

Source: housingwire.com