Chapter 25 — Key Takeaways
Fair Lending: ECOA, HMDA, Redlining, Disparate Impact, and the Appraisal Gap
The two lists — memorize these
| ECOA / Regulation B | Fair Housing Act | |
|---|---|---|
| Shared (5) | race · color · religion · national origin · sex | race · color · religion · national origin · sex |
| Unique | marital status · age (with capacity to contract) · receipt of public assistance income · good-faith exercise of a Consumer Credit Protection Act right | familial status · disability |
| Total | 9 | 7 |
| Reaches | all credit, any purpose | the whole housing transaction, including appraisals and real estate agents |
9 · 7 · 5 shared · 11 distinct. If you can produce those four numbers you can rebuild both lists.
Sex includes sexual orientation and gender identity under current federal interpretation. State and local law adds bases — source of income, military status, and others. Get your jurisdictions' lists in writing.
The core claims
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Fair lending is not a disclosure. No form discharges it, no clock closes it, no signature ends it. It governs every judgment call between the first call and the last condition.
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Disparate treatment requires no animus. Treating an applicant differently because of a prohibited basis is the violation — proved by comparison to similarly situated applicants, not by proving anyone felt anything.
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Disparate impact requires no differential treatment. A neutral policy, applied identically, with a discriminatory effect and no adequate business justification. Three steps: effect, business necessity, less discriminatory alternative.
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Redlining, today, is a claim about presence and absence — built from HMDA data, census tracts, and peer comparison, and remedied with branches, staff, marketing, and capital. Not about any individual denial.
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The most common individual exposure is unequal effort. Forty minutes for one applicant and five for another. Both truthful. Both polite. That is the sentence to remember from this chapter.
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Every application ends in a documented disposition. Closed, withdrawn, approved-not-taken, denied, or noticed as incomplete. Silence is not on the list.
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A borrower's concern about a valuation is a fair-lending moment, not an inconvenience. Send the report, use the ROV channel, route the bias allegation separately, document the date.
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Everything you type becomes a public row with your NMLS number on it.
The rules with numbers in them
| Rule | The number |
|---|---|
| Adverse action on a completed application | 30 days from completion |
| Notice of incompleteness | 30 days, with a stated reasonable deadline for the applicant |
| Counteroffer not accepted | 90 days from the counteroffer |
| Regulation B record retention, consumer credit | generally 25 months after notification |
| Appraisal-copy notice | generally within 3 business days of application |
| Appraisal copies delivered | promptly on completion, or a set number of business days before consummation, whichever is earlier — whether or not the loan closes |
| HMDA income field | reported in thousands (\$126,000 → 126) |
All periods and thresholds are set by regulation and are amended. Verify with your compliance department.
The Linden Street file, in one line each
- Register record: conventional purchase · originated day 51 · \$365,750 · 360 months · 6.625% · first lien · property value \$385,000 · income 126 · DTI 42.66 · CLTV 95.00 · representative score 706 · origination charges \$5,486.25 (1.500% of the loan) · discount points \$1,828.75** · lender credits **\$0 · rate spread from the 7.253% APR against APOR as of day 12, the date the rate was set · your NMLS ID.
- Violation point 1 — day 0: discouragement before an application exists. No record is created, which is what makes it the most dangerous moment in the file.
- Violation point 2 — day 5: failing to request the demographic information, coaching a decline, or recording something other than what happened. Plus the Regulation B appraisal notice.
- Violation point 3 — day 44: four business days of restructuring after the credit refresh moved the ratio 42.66% → 48.48%. The violation is doing that work here and not on the next file.
Key terms
ECOA · Regulation B · prohibited basis · adverse action notice · notice of incompleteness · Fair Housing Act · redlining · disparate treatment · disparate impact · steering · unequal effort · HMDA · Regulation C · loan application register (LAR) · appraisal bias · valuation gap · special purpose credit program (SPCP)
What you should be able to do Monday morning
Write down what every applicant gets — which programs you present, which assistance sources you check, which comparison you run — then run it on the next file that walks in, log the reason for any deviation in the loan origination system, and pull your last fifty applications to see where they came from.