Why Haven’t Loan Officers Been Told These Facts?
Sex Education from the Consumer Financial Protection Bureau and HUD
January 20, 2021, President Biden’s executive order 13988 extends the applicability of sex discrimination to the LGBTQ community.
Last week, the Journal outlined CFPB promulgation surrounding Regulation B. The CFPB interpretive rule relates to a novel expansion of sex discrimination as a protected class. The CFPB and HUD are clear in their intent to prosecute Regulation B offenders for practices far removed from discrimination against individual applicants or borrowers. HUD, the FHFA, FHLMC, FNMA, and other stakeholders are solidly on board the drive to increase LGBTQ sustainable homeownership rates. Stakeholders intend to ameliorate mortgage and housing discrimination against the LGBTQ community.
Specifically, HUD and the CFPB appear poised to aggressively investigate practices that unlawfully discourage or discriminate against LGBTQ individuals and communities from seeking credit opportunities with lenders in specific markets.
Previous class discrimination complaints and enforcement actions may preview the current regulatory war-footing against sex discrimination. For example, much like the CFPB prosecutes lenders for discrimination against communities of color, the industry might anticipate similar enforcement actions for sex discrimination complaints.
The analysis of fair lending enforcement actions where alleged racial discrimination occurs frequently points to instances of neglect, indifference, and incompetence. These failures are always concerning to stakeholders, as are dehumanizing treatments along protected class lines.
As required by the ECOA and FHA, lenders must be mindful of making their loan manufacture free from unlawful discrimination. Furthermore, positively targeting underserved markets is not reverse discrimination. Instead, to redress patterns of systemic discrimination, lenders must ensure their financing opportunities are accessible to both individuals and marginalized communities. The recognition of LGBTQ persons and the LGBTQ community as protected classes within the rubric of sex discrimination necessitates broad and substantive departures from business as usual.
Ramifications
So how might loan officers unintentionally violate fair lending laws? A simple misunderstanding of credit policy or processing requirements is all it takes. For example, a loan officer mistakenly suggests that a same-sex married couple might not have the same credit opportunities as a heterosexual married couple. In this instance, the LO engages in a prohibited form of discouragement. Or if the LO states or implies that the loan manufacture for a same-sex couple differs from that of a heterosexual couple, boom, mic-drop instance of sex discrimination. Notably, these compliance risks will arise when implementing any policy or procedure where the word spouse is prominent.
For an example of sex discrimination, consider the VA home loan program before the SCOTUS ruling on DOMA (Defense of Marriage Act). Before the SCOTUS DOMA ruling, the VA program discriminated against married same-sex couples. The VA generally required lenders to disallow co-borrower income unless the applicants were married. DOMA prohibited the federal government from recognizing same-sex marriage.
Consequently, persons of same-sex marriage had different and lesser VA home loan opportunities than those of heterosexual marriage. Similar to the “Whites Only” prohibitions from the Jim Crow era, the VA allowed “joint loans” for “unmarried” co-borrowers. However, a joint loan diminishes the primary benefit of the VA guaranty, the possibility of 100% financing. Effectively, the VA financing offered lesser credit opportunities for many same-sex married couples.
When SCOTUS struck down section 3 of the DOMA, essentially, the Obama Administration told the VA to go with same-sex marriage as long as the applicants were wed in a state recognizing same-sex marriage. The location of the subject property was not and is not dispositive when qualifying the same-sex marriage or transaction. Simply put, the Administration memo stated, if the applicants were married in a state recognizing same-sex marriage, go with it.
The VA then published a circular to clarify its marriage policy and cautioned stakeholders against the uneven treatment of same-sex marriage.
November 5, 2015, From the VA
Circular 26-15-29:
“a. The administrations within VA will apply the same level of scrutiny to all Veterans’ marriages, regardless of whether they are same-sex or opposite-sex marriages. VA will therefore process claims and applications involving same-sex marriage in the same manner as claims and applications based on opposite-sex marriage, without any additional scrutiny or development.
b. To further implement this policy of equal treatment, VA will accept a claimant’s or applicant’s assertion that he or she is married as sufficient evidence to establish the Veteran’s marriage. For the purposes of home loan benefits administered by Loan Guaranty Service, VA will accept an assertion on VA Form 26-1802a, HUD/VA Addendum to Uniform Residential Loan Application, to establish spousal status for the purpose of this benefit.”
Lenders should process loan applications involving same-sex marriage in the same manner as loan applications based on opposite-sex marriage, without any additional scrutiny or development.
Next week we hope to conclude this article with a few words of promise.
Behind the Scenes, FNMA Direct Consumer Outreach
FNMA Homeview – Public homeownership education
FNMA is stepping up direct consumer outreach with their free Homeview buyer education classes. The class is on-demand and leverages the Q2 2021 National Housing Survey information relative to entry-level homebuyer needs and wants.
Education or knowledge is often the difference between haves and have-nots. Use your referral campaign to get the word out. The classes should meet most stakeholder homebuyer education requirements.
Excerpt From FNMA Press Release January 12, 2022
Fannie Mae Launches Free Online Education Course, Empowering Aspiring Homebuyers to Become Confident, Successful Homeowners
WASHINGTON, DC – Fannie Mae (FNMA/OTCQB) today announced the launch of HomeView™, the company’s new online homeownership education course, to help consumers navigate the mortgage and homebuying process confidently and responsibly. Available free of cost, and accessible online anytime on any device at fanniemae.com/education, HomeView provides comprehensive, easy-to-understand content and resources designed to ensure aspiring homebuyers are well equipped to become more informed and successful homeowners.
Complexity in the homebuying process and misinformation or lack of understanding about qualification requirements can discourage potential homebuyers from taking their first steps toward purchasing a home. According to Fannie Mae research, a majority of consumers do not know the minimum credit score, down payment, and debt-to-income ratio needed to qualify for a mortgage, and fewer than 1 in 4 are aware that low-down-payment options are available. Additionally, homeownership education that aligns with the National Industry Standards is required for many first-time homebuyers to qualify for certain mortgage products, including low-down-payment loans. Fannie Mae’s HomeView meets this need by giving lenders and prospective homebuyers a free and easy way to benefit from critical homeownership education. By expanding access to reliable housing and financial knowledge, Fannie Mae provides a clearer path to homeownership for more qualified homebuyers, including low- and moderate-income and minority borrowers, helping to advance housing equity and address the homeownership gap among these communities.
See more here https://www.fanniemae.com/education
Tip of the Week
Beware of Greeks Bearing Gifts
Are your gifts to customers misunderstood?
Gift-giving in exchange for referrals violates the Real Estate Settlement Procedures Act Section 8(a). Therefore, giving gifts to referral partners or borrowers in exchange for referrals is an ethical and legal failure.
But let’s be honest. How can loan officers reciprocate with those who refer their friends, family, customers, and co-workers for a mortgage? One must be some kind of super-cad to collect these expressions of kindness and thoughtfulness without reciprocating.
Here is a thought, if you are waiting until someone gives you a referral before you give them a gift, you are already behind the eightball. Not just a compliance issue, also a relationship issue.
For example, a loan officer includes a crisp $20 bill inside thank you notes for referrals. Immediately, the referring party sees their act of trust and thoughtfulness monetized. And for $20 bucks. That is not much these days. Might the $20 gift cheapen the exchange in some way?
Gift-giving is a powerful way to gain influence. But, instead of connecting the $20 bill to the act of the referral, might a gift have far more power when offered without any strings attached. We give gifts to those we care about. Or those we want to influence.
If you thought the RESPA is restrictive, there are even more demanding federal and state laws restricting gift-giving to certain persons. Gift-giving is so powerful, that in many cases, it is unlawful for public officials and executives to retain gifts received in their official capacities. Additionally, various groups usually have professional codes limiting gift-giving.
Gift-giving can be much simpler for the loan officer wishing to influence potential referral sources. There is nothing unlawful or unethical about staying top-of-mind with your customers. Were that the case, our entire economic way of life would be indicted. Look at the biggest companies on earth and how they market themselves. In itself, there is nothing unlawful or unethical about marketing. That includes giving gifts to your customers. Remember, with the RESPA, the prohibition is the thing of value in exchange for a referral.
Is there a prohibition against giving your customers a gift because you want them to think about you? No. One might consider that your customer is more likely to send you referrals when you remain top-of-mind. Why wait until customers send a referral to give them a gift? What is that message anyway; “I only love you when you do something for me?”
Besides, why must we focus on referrals to people who need a mortgage NOW? That eliminates a whole lot of possible prospects, wouldn’t you think? Better to get there before they have a felt need for mortgage financing.
Step up your gift-giving. Get creative. How can you express affection and care for your customers in ways that don’t monetize the relationship?
It starts from the beginning. When you are helping folks with their mortgage needs, they are an open book. Find out what is important to them. People have many commonalities: sports, love for their children, laughing, ice cream. It’s not rocket science what is near and dear to their hearts. Often, their reasoning for buying the house can be revealing. Could you get to know them and discover what floats their boat? Of course.
Get that info into your CRM. Then figure out how you can put a smile on their face from time to time. If you don’t know how to leverage the CRM – learn. For example, you can create a tag for special interests. Create special interest categories, e.g., “closing anniversary,” “birthday,” “ice cream,” “coffee,” “tea,” “foodie,” “education,” “hiking,” “fishing,” “travel,” “home repair,” “skiing/surfing.” Add special interest tags to your customer’s CRM folder. Anytime you come across something in the news, a great sale, or anything that might connect with the customer’s tagged interests, broadcast that information to those folks. Naturally, social media presents enormous opportunities in this regard. However, that is a subject in its own right. Be careful with social media. All the MAP Act, UDAAP, and TILA rules apply.
Figure out how you can gift these folks every 45 days. Eight times a year. It might just be an email, a gift card, an anniversary (the closing) card, an invitation to an event or opening. Getting any ideas? Have a vendor do some of the lifting. Schedule four automatic touches, you provide the rest. Or any combination of the above.
More than ever, small acts of kindness without any strings attached can yield a significant bounty.