Loan Modification

FHA LGBT Discrimination: Is this Really a Problem?

By Gina Pogol

HUD announced a policy change yesterday that will provide more assistance to lesbian, gay, bisexual and transgender people who file complaints of housing discrimination. The policy directs its agencies to apply the Fair Housing Act, which doesn’t explicitly protect these folks, but which does prohibit housing discrimination.

As part of this effort, FHA will also direct its approved mortgage lenders that loan approval “must be based on the creditworthiness of borrowers and not on unrelated factors or characteristics, such as sexual orientation or gender identity,” HUD said.

Has discrimination against LGBT applicants been a problem with FHA lenders?

I can see where this could be an issue with landlords or neighbors, or even real estate agents, who may find themselves uncomfortable around people they aren’t used to, but don’t see how it would affect lending decisions. Sound business practices would dictate that you approve loans for those who qualify, period. By denying a loan to someone who is creditworthy, you’re cutting your own throat. And what lender can afford to do that in this economic climate?

But there are many ways to discriminate, and most are not even deliberate or conscious.

For example, a loan agent who is uncomfortable with a client may want him or her out of the office quickly and may not be as thorough as usual. The client may not get a good product recommendation because the loan officer is distracted. It may be as simple as the receptionist neglecting to offer coffee. Or in a case of overt discrimination, the pricing might be less attractive.

Can a law put an end to this?

Probably not directly, but indirectly, it can create a climate for change. Lenders can make organizational commitments to end this kind of behavior, to educate their workforces to recognize unconscious and overt discrimination and work to eliminate it. When I worked as a loan officer, we all underwent training to become more aware of our behavior and commit to treating everyone alike, even down to shaking hands the same way with every client, asking every person how he or she preferred to be addressed, offering them all refreshment, and giving each one 100% effort. It takes education and effort; a law can motivate lenders to get their workforces on board.

What can borrowers do?

Shop with several lenders, find a few with competitive pricing, and then work with an agent who offers a fair deal and respectful treatment. Shopping is the best way of making sure that your business goes to a lender that doesn’t discriminate. Shopping online, where appearances don’t enter into negotiations, is another way to get the best price available.

Full post as published by FHA Mortgage Guide on July 02, 2010 (boomark / email).