Over the last few weeks, I have been paying attention to some of the new Dodd-Frank rules that have come out. I have read some summaries and have attended a couple of lectures on the issue, but I have yet to sit down and read the regulations word for word. I expect the regulations will provide insights that some of the summaries glossed over.
At the same time in which I was reviewing the Dodd-Frank summaries, a case came across my desk in which I had to do some additional research. It involved discrimination issues in consumer lending on a residential mortgage.
My eyes were opened by some
of the things out there of which
I had been previously unaware.
One of the biggest “ah-ha” moments came when reading a portion of the CFR (Code of Federal Regulations) which indicated that a lender did not need to have the intent to discriminate in order to be guilty of committing discrimination in a residential lending situation. If they caused the “discriminatory effects,” then that was enough.
Although there has been some variation in the application of the discriminatory effects’ standard, neither HUD nor any federal court has ever determined that liability under the Act requires a finding of discriminatory intent.
The foregoing statements should cause all real estate investors who deal with residential end-buyer, owner-occupants to pause and reconsider everything they are
doing in their businesses to see if what they are doing is having
a discriminatory effect.
This is by no means the complete solution, and it is not enough to fix every situation, but the first thing to remember is that EVERYONE wanting to apply for a rent-to-own, lease option, “Lonnie deal”, owner finance, or loan modification should be permitted to complete the application whenever they ask to do so.
Secondly, EVERYONE should be given the same type of application for the same type of transaction.
Bottom line, be careful of how you approach any transaction. Treat everyone the same. If needed use a licensed loan originator as needed and……..check with counsel . to make sure you are doing it in a systematic, consistent way.