Equal Housing laws prohibit discrimination in mortgage lending and other areas of real estate. Learn more about your rights under these laws.
You might have noticed the term “Equal Housing” on advertisements, websites, and other marketing materials for real estate professionals, including mortgage lenders. On our website, you’ll find an “Equal Housing Opportunity” logo at the bottom of each page.
What does “equal housing” mean, and how does it affect real estate sales? In short, equal housing works to ensure that everyone gets a fair opportunity to access housing. Federal and state law prohibit mortgage lenders from discriminating on the basis of various factors.
What is an “Equal Housing" Lender?
Any bank or other lender insured by the Federal Deposit Insurance Corporation (FDIC) may not discriminate against prospective borrowers based on “race, color, religion, national origin, sex, handicap, or familial status.” Federal regulations require lenders to display the Equal Housing Opportunity logo in all advertising and marketing.
The Equal Housing Logo
The U.S. Department of Housing and Urban Development (HUD) first created the Equal Housing logo in 1972. The graphic element of the logo consists of the outline of a house with an equal sign inside it. The words “EQUAL HOUSING OPPORTUNITY” appear below the house as part of the logo.
Defining Discrimination in the Mortgage Lending Space
Discrimination can take numerous forms that fall into three broad groups:
Overt discrimination: Open, intentional discrimination, such as flatly stating that a bank will not lend to people of a certain race or nationality.
Disparate treatment: This can be more subtle, but no less harmful. Redlining is a major example of this type of discrimination. The term originally referred to the refusal by banks to make mortgage loans for homes in certain areas. Color-coded maps issued by the U.S. government in the 1930s used red borders or shading to indicate areas deemed too risky for mortgage loans. The “redlined” areas were often neighborhoods where the majority of the population was Black. This practice continued into the 1960s.
Disparate impact: A policy or practice that appears neutral can still be discriminatory if it (1) has a disproportionate impact on members of protected groups and (2) has no business justification. An example might involve a lender that requires a higher credit score than the industry standard. If it turns out that this has a disparate impact on borrowers of one particular race, nationality, etc., and the lender cannot provide a compelling business reason for the higher credit score requirement, the policy could be unlawful.
A Brief History of How Equal Housing Came to Be
Congress first enacted legal protections against housing discrimination shortly after the Civil War. The Civil Rights Act of 1866 prohibited discrimination on the basis of race in housing and employment, but it did not provide any suitable penalties for violations. A landlord who refused to rent to someone based on race violated the law but did not face appropriate consequences.
It took another 98 years for Congress to pass a law with teeth. The Civil Rights Act of 1964 addresses multiple forms of discrimination. Title VIII of the statute, also known as the Fair Housing Act, deals with housing discrimination.
The law did not specifically include lending, however, until Congress passed the Fair Housing Amendments Act of 1988. This law is the source of the FDIC regulations described above. As amended, the Fair Housing Act prohibits lenders from discriminating against borrowers on the basis of:
Familial status, e.g. single or married, with or without children, etc.
The Texas Fair Housing Act, passed by the Texas Legislature in 1993, covers all of the same protected groups except disability.
The federal Equal Credit Opportunity Act of 1974 also addresses discrimination in lending. Its coverage is slightly different from the Fair Housing Act. It does not include disability, but it does prohibit discrimination based on age, provided that a borrower is old enough to enter into a contract. Instead of “familial status,” it covers “marital status.” A lender would not be able to refuse to lend money to unmarried women, to name one example from not-so-distant history.
What happens if a lender violates Equal Housing rights?
A person who believes that a lender has violated their rights under the Fair Housing Act may file a complaint with HUD, which will conduct an investigation. HUD may pursue legal action against the lender itself or refer the matter to the Department of Justice (DOJ). The Texas Workforce Commission (TWC) has authority to enforce the Texas Fair Housing Act. The Federal Trade Commission (FTC) enforces the Equal Credit Opportunity Act. Enforcement by HUD, DOJ, FTC, or TWC can result in hefty monetary penalties against the lender.
The person may also file a lawsuit directly against the lender to recover damages under any of these statutes. They must do so within two years of the alleged violation. Damages may include:
Actual damages, which compensate a person for losses caused by the Equal Housing violation
Punitive damages, which are intended to punish a lender for particularly egregious violations
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