On August 31, the New York City Department of Financial Services (DFS) issued industry letter to all supervised mortgage lending institutions and their affiliates to prevent discrimination on the basis of sexual orientation in mortgage lending. New York State Fair Credit Law prohibits discrimination, inter alia, in the grant, withholding, renewal or renewal, or in setting the rates, terms, or conditions of any form of credit based on sexual orientation.
After analyzing mortgage applications and terms from four non-depository lenders and one bank between 2016 and 2018, DFS found noticeable differences in approvals and denials, as well as in terms of lending to same-sex and opposite-sex couples for mortgage loans. While the DFS was unable to determine whether these differences were the result of discrimination, it notes that the findings raise sufficient concerns about possible discrimination based on sexual orientation. As a result, DFS issued its industry letter.
The industry letter recommends all Mortgage lenders are taking the following measures to reduce the risk of discrimination based on sexual orientation:
- Make the board and senior management responsible for developing a fair lending plan and ensuring that the lender’s practices are consistent with that plan.
- Monitor the implementation of a fair lending plan and adherence to the plan’s policies and procedures by continually referring to the application and underwriting processes and pricing policy.
- Implement a training program for new hires, existing employees and management at least annually to provide loan personnel with updated information on fair lending issues and require participants to demonstrate understanding and commitment to adhere to the principles of fair lending laws and the policies and procedures contained in fair lending. lending plan.
- Ensure that any rejected or withdrawn loan applications from same-sex couples who have indicated that they will live together on a mortgaged property are automatically and promptly reviewed by the superior supervisor.
- Extend, in writing, the principles of a fair lending plan to the refinancing and collection practices of the lender.
- Review and update the Fair Lending Plan and Compliance Program periodically, including periodic reviews by senior management, to ensure they are up to date.
DFS also recommends that all mortgage lenders take the following regulatory compliance actions:
- Update policies and procedures to combat sexual orientation discrimination.
- Use price lists and exclusion logs to document statements from same-sex couples that have indicated they will live together on a mortgaged property, which are either (a) rejected for any reason other than not adhering to the institution’s written underwriting standards, or (b) provided but subject to conditions the loan is less favorable than the applicable rate tables would otherwise determine.
- Monitor the loan portfolio for fair lending policies and procedures, which may include identifying those loan applications and loans made to same-sex couples that have indicated that they will live together on a mortgaged property, and allocating such applications and loans from those applications from same-sex couples that do not consist of two people who have indicated that they will live together in the mortgaged property, and the loans provided to them.
- Evaluate marketing and advertising strategies regularly to ensure that you adhere to the principles and provisions of fair lending laws and a fair lending plan.
- Investigate and try to identify the reasons for any unexplained differences in underwriting and prices between same-sex and opposite couples who indicated they would be living together on mortgaged property.
The industry letter is another example of how regulators – both state and federal – emphasize fair lending and, more broadly, the concept of capital as a priority in their regulatory plans.