What does ECOA stand for?
Equal Credit Opportunity Act
What Regulation does ECOA fall under?
B
Factors that cannot be used to discriminate under ECOA - rewatch YouTube video and edit
SCORRCAMP
- Sex
- Color
- National origin
- Race
- Religion
- Consumer credit protection act
- Age
- Marital status
- Public assistance
When was ECOA signed into law?
1974
Who supervises ECOA?
CFPB
What is Regulation B?
It requires that Banks provide a copy of the appraisal report used in connection with an application for credit to be secured by a lien on a dwelling
Notifying borrowers of actions taken under ECOA
It may be oral or written if approved. If adverse, it must be in writing. All must be within 30 days.
Required disclosures when an application is denied under ECOA
- Creditor’s name and address
- An ECOA antidiscrimination notice
- The name and address of the creditor’s primary regulator
- Either a statement of the specific reasons for the action taken or a disclosure of the applicant’s right to the statement including the name, address and number from where they can obtain it
Adverse action examples
- Incomplete credit application
- Insufficient number of credit references provided
- Unacceptable type of credit references provided
- unable to verify credit references
- Temporary or irregular employment
- Unable to verify employment
- Length of employment
- Income insufficient for amount of credit requested
- Excessive obligations in relation to income
- Unable to verify income
- Length of residence
- Temporary residence
- Unable to verify residence
- No credit file
- Limited credit experience
- Poor credit performance with us
- Delinquent past or present credit obligations with others
- Collection action or judgement
- Garnishment or attachment
- Foreclosure or repossession
- Bankruptcy
- Number of recent inquiries on credit bureau report
- Value or type of collateral not sufficient
- Other
Notifications for adverse action
- Notification of action taken, ECOA Notice, and statement of specific reasons within 30 days
- Content of notification within 30 days
- Notice of Incompleteness
- Oral Notice by Small-Volume Creditors
Definition of elderly
62 years or older
Required information for an application
ALIENS
- Name
- Income
- SSN
- Address is the home you plan to purchase or refinance
- Estimate of the home’s value
- Loan amount you want to borrow
MLO actions when borrower refuses to provide race/gender info
If face-to-face, guess based on visual observation and surname and notate on application that borrower declined to answer.
Co-signer requirements
For conventional loans:
- responsible to pay the loan if the borrower defaults
- DTI will be looked at
For FHA loans:
- must be a relative or close friend
- if a friend, you must write a letter explaining the relationship and why you want to help
- must live in the U.S. for the majority of the year
- must have DTI of 70% or lower if down payment is under 20%
- must be on title
For USDA loans:
- must have DTI of 41% or less
Acceptable income for a loan review
- Employment income (wages, salary, bonuses, commissions, OT, self-employment, freelance, gig work, tips)
- Interest and dividend income
- Retirement, govt and pension income
- Social security income
- Disability payments
- Maternity and paternity leave payments
- Foster care payments
- Alimony and child support
- Trust income (if proof the payments will continue for years)
- Unemployment income (for seasonal workers)
- Rental or investment income
- VA benefits
- Military income
Creditworthiness factors
4 C’s:
1. Capacity to pay back your loan (income, employment history, savings, monthly debt payments)
2. Capital (readily available money and savings, plus investments)
3. Collateral
4. Credit
