- Mortgage discrimination is often subtle and difficult to spot.
- An applicant being offered less favorable mortgage terms due to their race is an example of mortgage discrimination.
- Shopping around with multiple lenders and comparing offers can make it easier to see if you've been discriminated against.
Homeownership is an important part of wealth-building for many Americans, which is what makes discrimination during the homebuying and mortgage application processes so harmful.
Mortgage discrimination is a type of housing discrimination in which a borrower's demographics or other characteristics impact their loan application. To protect yourself, it's important to know what constitutes mortgage discrimination, what it typically looks like, and what you can do if you think you've experienced discrimination.
What is mortgage lending discrimination?
If a lender is making decisions about its mortgage approvals or policies based on certain protected characteristics, like gender, religion, or disability, that's considered mortgage discrimination.
Mortgage discrimination has been happening for decades, and dates back to redlining, when neighborhoods were mapped based on economic makeup and used to issue and price mortgage loans in the mid-1900s. This made it harder and more expensive for minorities and those with lower incomes to break into homeownership.
Redlining has since been made illegal, and many laws have been passed to address lending discrimination. We'll go more into these later on.
Types of mortgage lending discrimination
Mortgage discrimination doesn't just happen when someone is explicitly denied a loan because they're a member of a specific group — it's often more subtle.
Discriminatory policies can fall into one of two categories: disparate impact, or disparate treatment. With disparate impact, a lender may have the same policies for all borrowers, but they impact certain borrowers differently than others.
An example of this would be if a lender looks at gross income for all its applicants, but doesn't treat taxable income differently than non-taxable income.
This could disproportionately impact those who receive non-taxable income, such as disabled individuals or the elderly, and lead them to qualify for less than what they actually can afford. As long as you meet credit and debt requirements, you can get a mortgage with Social Security income — and if you aren't required to pay taxes on that income, lenders typically need to look at it differently than other types of income. Not doing so can have a disparate impact on borrowers that could be considered discriminatory.
With disparate treatment, borrowers are treated differently based on protected characteristics. This can be overt, such as a lender stating that they don't make loans to certain groups or offering different terms for applicants based on protected classes. It can also be more subtle, and only recognizable when comparing similar applicants who have different outcomes.
An example of this would be if two applicants had negative information on their credit reports, but the lender decides to work with one applicant, who is white, while denying the other, who isn't white.
All in all, mortgage lending discrimination usually falls under one of these umbrellas:
- Racial discrimination, in which a borrower's race or the racial makeup of the neighborhood they're buying in impacts their mortgage options
- Gender discrimination, which sees a borrower's mortgage application influenced by their gender identity
- Disability discrimination, as in the example noted above
- Age and income discrimination, wherein a borrower's age or income level impacts one's mortgage process
There are other forms, too, that may be less common — things like discrimination based on a borrower's nationality or religion.
Legal protections against mortgage lending discrimination
Mortgage discrimination is prohibited by both the Fair Housing Act and the Equal Credit Opportunity Act (ECOA).
Fair Housing Act
The Fair Housing Act was created to prevent discrimination at all steps in the housing process and applies to those buying a home or renting one. It has been amended several times to include additional protections.
The FHA bans discrimination based on the following characteristics:
- Race or color
- Religion
- Sex (including gender, gender identity, sexual orientation, and sexual harassment)
- Familial status
- National origin
- Disability
Equal Credit Opportunity Act
The ECOA is a law that applies to companies that extend credit to consumers. This can include insurers, mortgage lenders, department stores, credit card issuers, and more.
It prohibits also discrimination based on:
- Race or color
- National origin
- Religion
- Sex (including gender identity and sexual orientation)
- Marital status
- Age (provided the applicant has the capacity to enter a contract)
- Applicant's receipt of income from a public assistance program
- Applicant's exercise, in good faith, of any right under the Consumer Credit Protection Act.
Other relevant laws
Depending on your situation, there may be other laws that apply to mortgage and housing discrimination, too, including the Americans with Disabilities Act, which protects consumers with disabilities, and the Civil Rights Act, which prevents broad discrimination based on race, color, religion, sex, or nationality.
The Community Reinvestment Act also applies. This is a federal law that requires banks and credit unions to meet the needs of all local borrowers — regardless of income or status.
Identifying mortgage lending discrimination
Spotting mortgage discrimination can be difficult, because it often becomes obvious only when comparing similar applications that had different outcomes.
Red flags
You should always shop around with multiple mortgage lenders, before getting a loan. Not only can this get you the best rate, but it can make it easier to spot discrimination, too.
Once you have estimates from several lenders, see if any of the terms you were offered by one company seem unusual compared to the other preapprovals you received. This could be a sign something is amiss.
You should also have a basic understanding of what lenders look for when approving an applicant for a mortgage. If you meet those qualifications and are denied, this may also be a red flag that discrimination could be at work.
Other signs to look for include:
- Asking about your spouse or children (or plans for children), unless they're applying for the loan with you
- Discouraging you from applying for a loan
- Pushing you toward loan products that have less favorable terms or rates
- Being treated differently in person than you have been online or via phone
If you suspect you might be being discriminated against, talk to a lawyer as soon as possible.
Case studies
Fair housing groups like the Fair Housing Justice Center (FHJC), a nonprofit organization in New York that works to eliminate housing discrimination, send testers to lenders suspected of engaging in mortgage discrimination. These testers pose as potential loan applicants and gather data on how the lender treats different types of applicants.
Fred Freiberg, FHJC's national field consultant, says that in these tests they've seen white applicants with less qualified applications receive quotes for larger loan amounts than minority testers who had stronger applications. White testers often received more assistance from lenders as well.
"Often white testers were coached into ways in which they could improve their financial situation and break into a higher price range and home price," Freiberg says. "And that coaching didn't often occur with the testers they were matched with."
When you're offered a mortgage by a lender, it's difficult to know if the lender is offering you worse terms based on protected characteristics. This is why testing done by groups like FHJC is so important.
"Most people would not know that they were discriminated against," Freiberg says.
What to do if you experience discrimination
If you have a feeling you might have been discriminated against, you should:
Document everything
Keep all correspondence between you and your lender, and record any phone conversations you have with them (if it's legal in your state). Your attorney may need this as evidence later on.
File a complaint
You can also reach out to a local fair housing organization to get assistance. They can help you file a complaint with the right government agencies and may be able to assist you if you decide to take legal action. They can also send testers to the lender to try to gather evidence of discriminatory practices.
"The burden of enforcing the fair housing and fair lending laws should not fall exclusively on the victims of discrimination," Freiberg says. "We all have a responsibility to clean up this problem."
If you want to report housing discrimination, you can file a complaint with HUD or the Consumer Financial Protection Bureau. Most states also have a department where you can file fair housing complaints.
Seek legal advice
Finally, get an attorney involved. They can help you determine if discrimination has been committed and walk you through the legal process for addressing it.
Mortgage lending discrimination resources and support
If you're being discriminated against, there are many resources you can turn to, including:
Government agencies
At the national level, the CFPB and HUD can be helpful in cases of discrimination. Individual states also have agencies that can help. See below to find the one in your state.
*Does not have state-associated fair housing assistance
Nonprofit organizations
Many non-profits offer assistance with mortgage discrimination, too, including:
- National Fair Housing Alliance
- HOPE Fair Housing Center
- Alliance for Housing Justice
- North Texas Fair Housing Center
- Mercy Housing
- National Disability Rights Network
Legal aid services
If you need help getting legal assistance, look to:
Mortgage lending discrimination prevention and advocacy
The best way to prevent mortgage discrimination is to educate yourself. Understand the mortgage process and what standards you'll need to meet to qualify, and know what red flags to watch for in the process.
You should also report potential acts of discrimination and take action against discriminatory policies you face as you apply for a mortgage. This can prevent future acts of discrimination from occurring to others.
Finally, consider getting involved in the cause. Many groups advocate for fair lending practices and housing reform. Find one near you, and help make housing more equitable in your community.
Mortgage discrimination FAQs
Mortgage discrimination is often subtle and hard to spot. An example of mortgage discrimination is if a lender offers applicants with similar credit profiles different terms based on their race.
Both the Fair Housing Act and the Equal Credit Opportunity Act prohibit discrimination in mortgage lending.
No, mortgage lenders can't discriminate based on age. They may, however, use your age as part of determining other aspects of your creditworthiness — for example, they may look at how long you have before retirement when considering your income. They can also refuse to lend to someone who isn't old enough to legally enter into a contract.
