Monday, September 28, 2009

Fair Housing and Home Mortgage Disclosure Acts

Two other important antidiscrimination laws are the Fair Housing Act, which forbids discrimination in lending for the purchase or renovation of residential property, and the Home Mortgage Discloser Act (HMDA). The latter requires financial institutions to disclose to the public the amount and location of their home mortgage and home improvement loans. HMDA was designed to eliminate "redlining," in which some lenders would mark out areas of a community as unsuitable for mortgage loans because of low income, high crime rates, or other negative factors. Not only was the low supposed to increase home mortgage loans to low- and moderate-income neighborhoods, but it was also intended to encourage the public to divert its funds away from those institutions practicing redlining. Unfortunately, this law reveals information about the supply of mortgage credit but not the demand. Also, nondeposit mortgage lenders are exempted from its provisions even though they are often significant factors in the local real estate market.
Both HMDA and the Fair Housing Act require nondiscriminatory advertising by lenders. No longer can a consumer lending institution direct its advertisements solely to high-income neighborhoods to the exclusion of other potential customers. When loans to purchase, construct, improve, repair, or maintain a dwelling are advertised, the lender must state that such loans will be made without regard to race, color, religion, sex, or national origin. On written advertising, an "equal housing" symbol must be attached. Clearly, then, in advertising the availability of credit, in accepting and evaluating loan applications, and in the actual granting of credit, the principles of civil rights and nondiscrimination apply. Lenders are free to choose who will receive credit, but that decision must be made within the framework of the nation's social goals.

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