Chapter 25 — Self-Check Quiz

Fair Lending: ECOA, HMDA, Redlining, Disparate Impact, and the Appraisal Gap

Twenty-six questions. Where the material is exam-relevant, the questions are written in the style of the SAFE MLO test. Answer key is collapsed at the bottom — work the whole set before opening it.

1. Which of the following is a prohibited basis under the Fair Housing Act but not under ECOA?

  • A. Marital status
  • B. Familial status
  • C. Receipt of public assistance income
  • D. Age

2. Which of the following is a prohibited basis under ECOA but not under the Fair Housing Act?

  • A. National origin
  • B. Disability
  • C. Marital status
  • D. Color

3. How many prohibited bases does ECOA name, and how many does the Fair Housing Act name?

  • A. Seven and nine, respectively
  • B. Nine and seven, respectively
  • C. Nine and nine
  • D. Seven and seven

4. An applicant is 71 years old. Under which statute is age a prohibited basis, and what qualifier attaches to it?

  • A. Fair Housing Act; none
  • B. ECOA; provided the applicant has the capacity to enter into a binding contract
  • C. Both, equally
  • D. ECOA; provided the applicant is at least 62

5. A creditor extends credit only to applicants who have been employed by their current employer for at least three years. The policy is applied to every applicant identically, and applicants in one prohibited-basis group are denied at a materially higher rate. This is best analyzed as:

  • A. Overt discrimination
  • B. Disparate treatment
  • C. Disparate impact
  • D. Not a fair-lending issue, because the policy is neutral

6. Which statement about disparate treatment is correct?

  • A. It requires proof that the creditor intended to harm the applicant
  • B. It requires proof of hostility toward a protected group
  • C. It does not require animus and may be shown by comparison to similarly situated applicants
  • D. It applies only where the creditor's policy is facially discriminatory

7. Under Regulation B, a creditor must generally notify an applicant of action taken on a completed application within:

  • A. 3 business days
  • B. 15 days
  • C. 30 days
  • D. 90 days

8. A creditor makes a counteroffer. The applicant neither accepts nor responds. The creditor must send an adverse action notice within:

  • A. 30 days of the counteroffer
  • B. 60 days of the counteroffer
  • C. 90 days of the counteroffer
  • D. No notice is required

9. An application is missing documents the applicant can supply. Which of the following is not a permissible course of action?

  • A. Send a notice of incompleteness specifying what is needed and a reasonable deadline
  • B. Deny the application and send an adverse action notice
  • C. Obtain the documents and continue processing
  • D. Leave the file open and take no further action until the applicant follows up

10. Which of the following is not adverse action under Regulation B?

  • A. Denial of a completed application
  • B. A counteroffer that the applicant accepts
  • C. An approval on materially different terms that the applicant declines
  • D. Refusal to grant credit in substantially the amount requested

11. For an application for credit secured by a dwelling, the applicant declines to provide ethnicity, race, and sex. The application was taken in person. The loan officer must:

  • A. Record "information not provided" and take no further action
  • B. Note ethnicity, race, and sex on the basis of visual observation or surname
  • C. Refuse to proceed with the application
  • D. Ask the applicant again and document the second refusal

12. Which of the following statements about HMDA demographic data is correct?

  • A. It may be considered in underwriting if the applicant volunteers it
  • B. It is collected for government monitoring purposes and plays no part in the credit decision
  • C. It is collected only for government-insured loans
  • D. It is optional for the creditor to request

13. Which is not one of HMDA's stated statutory purposes?

  • A. Determining whether institutions are serving the housing needs of their communities
  • B. Helping public officials target public investment
  • C. Identifying possible discriminatory lending patterns
  • D. Establishing minimum underwriting standards for residential mortgages

14. The HMDA rate spread is the difference between:

  • A. The note rate and the average prime offer rate
  • B. The annual percentage rate and the average prime offer rate for a comparable transaction
  • C. The note rate and the par rate on the lender's rate sheet
  • D. The annual percentage rate and the note rate

15. A loan officer stops working a file, the borrower stops calling, and ninety days later the file is coded "withdrawn by applicant." Which of the following is true?

  • A. No violation, because no credit decision was made
  • B. A Regulation C data-integrity problem only
  • C. A Regulation B notification problem only
  • D. Both a Regulation C data-integrity problem and a Regulation B notification problem

16. Modern redlining enforcement primarily alleges that a lender:

  • A. Denied individual applicants because of race
  • B. Charged higher rates in certain neighborhoods
  • C. Avoided marketing to, taking applications from, and lending in majority-minority neighborhoods within the market it actually served
  • D. Failed to file its loan application register on time

17. In a redlining analysis, the reasonably expected market area is determined by:

  • A. The lender's stated service area
  • B. The lender's actual marketing, application, and lending activity
  • C. The counties in which the lender is licensed
  • D. The lender's Community Reinvestment Act assessment area, in all cases

18. Which of these is not a typical remedial element in a public redlining resolution?

  • A. A loan subsidy fund for the affected areas
  • B. Opening or maintaining a branch or loan production office in the underserved geography
  • C. Targeted advertising and community partnerships
  • D. A prohibition on originating loans in the affected areas

19. Which of the following best describes the individual loan officer's most common fair-lending exposure?

  • A. Denying an application because of a prohibited basis
  • B. Making an overtly discriminatory statement to an applicant
  • C. Unequal effort — differential information, restructuring, or persistence across similar applicants
  • D. Failing to file the loan application register

20. A special purpose credit program established by a for-profit creditor must be:

  • A. Approved in advance by the CFPB
  • B. Limited to applicants of a single race
  • C. Established and administered under a written plan identifying the class to be benefited and the standards for extending credit
  • D. Offered only through a nonprofit intermediary

21. Within a qualifying special purpose credit program, a creditor may:

  • A. Charge higher rates to the benefited class
  • B. Request and consider information that would otherwise be a prohibited basis, to determine eligibility
  • C. Waive the adverse action notice requirement
  • D. Exclude the program's loans from the loan application register

22. Appraisal bias in a residential mortgage transaction is:

  • A. Outside the reach of federal fair-lending law, because appraisers are independent
  • B. Covered by the Fair Housing Act, which reaches the appraisal of residential real property
  • C. Governed only by state appraiser licensing boards
  • D. A quality-control matter for the appraisal management company alone

23. Under Regulation B, a creditor must provide copies of appraisals and other written valuations on a first-lien dwelling-secured application:

  • A. Only if the applicant requests them in writing
  • B. Only if the loan closes
  • C. Promptly upon completion or a set number of business days before consummation, whichever is earlier — whether or not the loan closes
  • D. At the applicant's expense, at any time within 30 days of closing

24. Short answer. State the four prohibited bases that appear under ECOA but not under the Fair Housing Act, and the two that appear under the Fair Housing Act but not under ECOA.

25. Short answer. A loan officer offers a rapid rescore to one applicant four points below a pricing threshold and does not mention it to a second applicant in the identical position. Both loans close. Name the doctrine in play and the single document that would most likely have prevented the finding.

26. Short answer. Name the three steps of the disparate-impact burden-shifting framework and say which party carries the burden at each step.

Answer key — open only after you have answered all twenty-six **1. B — Familial status.** Marital status, public assistance income, and age are ECOA bases. Familial status and disability are the two bases the Fair Housing Act adds. **2. C — Marital status.** National origin and color appear on both lists. Disability is a Fair Housing Act basis. **3. B — ECOA names nine; the Fair Housing Act names seven.** Five bases are shared (race, color, religion, national origin, sex), for eleven distinct protected characteristics across the two statutes. **4. B — ECOA, provided the applicant has the capacity to enter into a binding contract.** The "62" in choice D is the threshold for an "elderly applicant" in certain Regulation B provisions, not a condition on the prohibition itself. **5. C — Disparate impact.** The policy is facially neutral and applied identically; the claim is about its effect. The lender would have to show a substantial legitimate business need and confront whether a less discriminatory alternative existed — here, an agency-standard two-year work *history* across employers. **6. C.** Disparate treatment requires that a prohibited basis was a factor in the treatment. It does not require intent to harm, hostility, or a facially discriminatory policy. **7. C — 30 days**, running from receipt of the *completed* application. **8. C — 90 days** of the counteroffer. **9. D.** Doing nothing is the one option Regulation B does not provide. You complete it, notice it as incomplete with a real deadline, or deny it. **10. B.** A counteroffer the applicant *accepts* is not adverse action. If they do not accept, you owe a notice — see question 8. **11. B.** In a face-to-face application, a decline obligates the loan officer to note ethnicity, race, and sex on the basis of visual observation or surname, and to record that the applicant declined to self-identify. **12. B.** Collected for monitoring, excluded from the credit decision. That is the entire design: the data exists so the prohibition can be audited. **13. D.** HMDA is a disclosure statute. It sets no underwriting standards. **14. B — the APR less the average prime offer rate for a comparable transaction**, as of the date the rate was set. Note that it uses the APR, so origination charges and points move it. **15. D.** Both. The applicant received no notice of any kind, which is a Regulation B problem; and the register carries a code that is not true, which is a Regulation C problem. Examiners look specifically at withdrawn and incomplete files for exactly this reason. **16. C.** Redlining as a modern theory is a claim about presence and absence — where the lender marketed, staffed, and lent — not about any individual denial. **17. B.** The REMA is derived from the lender's own activity. A lender cannot narrow its market by declining to serve part of it. **18. D.** The remedies are affirmative acts of market participation: subsidy funds, branches, outreach, dedicated staff, partnerships, training. The remedy for absence is presence. **19. C — unequal effort.** Forty minutes for one applicant and five for another, both conversations truthful, is the most common individual-level exposure in origination. **20. C — a written plan** identifying the class to be benefited and setting out the procedures and standards, based on a determination that the class would otherwise be denied credit or receive it on less favorable terms. **21. B.** That permission is the entire point of the provision: it creates a narrow lawful space in which otherwise-prohibited information may be considered, because the targeting is remedial. **22. B.** The Fair Housing Act specifically reaches the appraisal of residential real property. Appraisers are *also* bound by professional standards and state boards — but that does not displace the statute, and ECOA separately reaches the creditor's use of the valuation. **23. C.** Promptly upon completion or a set number of business days before consummation, whichever is earlier; provided whether or not the loan closes and whether or not the applicant asks. The applicant may waive the timing but still receives the copies. You may charge a reasonable fee for the appraisal itself, not for the copy. **24.** ECOA only: **marital status; age (with capacity to contract); receipt of income from a public assistance program; the good-faith exercise of a right under the Consumer Credit Protection Act.** Fair Housing Act only: **familial status; disability.** **25.** **Disparate treatment**, in its unequal-effort form. That both loans closed is not a defense — the second applicant paid more for the same file. The document that would most likely have prevented the finding is a **contemporaneous note in the loan origination system** recording what was offered and why, ideally against a written standard of what every applicant is offered. **26.** **Step 1** — the challenger identifies a specific policy or practice and shows it causes a significantly disproportionate adverse effect on a prohibited-basis group. **Step 2** — the lender shows the practice serves a substantial, legitimate, nondiscriminatory business need. **Step 3** — the challenger shows a less discriminatory alternative would serve that same need. --- *Regulatory requirements, timing periods, coverage thresholds, and the precise contents of required notices are amended. Verify current requirements with your compliance department, the CFPB, HUD, and your state regulator. Nothing here is legal advice.*