Why Haven’t Loan Officers Been Told These Facts?
Pricing Exceptions Require Evidence of Concession

Title X of the Dodd-Frank Act, known as the Consumer Financial Protection Act, requires the Consumer Financial Protection Bureau (CFPB) to submit an annual written report to Congress. This report outlines the agency’s efforts to fulfill its responsibilities under the Equal Credit Opportunity Act and other laws prohibiting discrimination. Last month, the Consumer Financial Protection Bureau (CFPB) published the report. 12 U.S.C. § 5493(c)(2)(D) Office of Fair Lending and Equal Opportunity: The Office of Fair Lending and Equal Opportunity shall have such powers and duties as the Director may delegate to the Office, including providing annual reports to Congress on the efforts of the Bureau to fulfill its fair lending mandate.

Who controls the past controls the future: who controls the present controls the past – George Orwell

It is important to note that the CFPB in 2025 was significantly different from the CFPB in 2024. As previously reported by the LOSJ, in 2025 the CFPB voiced strong disapproval of the decades-old legal theory of disparate impact as a reasonable interpretation of the ECOA (Equal Credit Opportunity Act). However, the CFPB’s rejection of disparate impact as a basis for fair lending examination or enforcement actions does not mean that it has abandoned its fair lending responsibilities. Nonetheless, if the lack of public enforcement actions in 2025 is any indication of the Bureau’s priorities, marginalized borrowing communities may need to lower their federal fair lending expectations for the years ahead. Considering the fundamental changes in supervision and enforcement, one may question whether any of the CFPB’s fair lending actions in 2024 reflect their concerns moving forward. 2025 would appear to answer that question.

In 2024, the two most frequently identified fair lending issues in supervisory communications related to the granting of pricing exceptions and HMDA violations.

Fair Lending Report of the Consumer Financial Protection Bureau for 2024, Published December 2025

“. . . the agency’s fair lending work has shifted significantly to better align with the current administration’s priorities, guided by several executive orders, including: Executive Order 14281, “Restoring Equality of Opportunity and Meritocracy;” Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity;” and Executive Order 14331, “Guaranteeing Fair Banking for all Americans.”

In furtherance of the objectives set out by Executive Order 14281, the CFPB will no longer use disparate impact in its supervision or enforcement of fair lending laws. To that end, the Bureau has closed all elements of open exams and investigations that relied on disparate impact liability. The Bureau also terminated CFPB orders that relied on disparate impact liability. Going forward, the CFPB is focusing its fair lending supervisory and enforcement resources on matters with direct evidence of intentional racial discrimination and identified victims.

In 2025 and beyond, the CFPB will be working only on areas clearly within its statutory authority, prioritizing pressing threats to consumers, focusing on actual fraud against consumers, where there are identifiable victims with material and measurable consumer damages, and redressing tangible harm by getting money back directly to consumers. The CFPB has a strong focus on protecting and providing redress to service members and their families,
and veterans.

In 2024, the CFPB focused much of its fair lending supervision efforts on: mortgage origination, small business lending, and the use of automated systems and models in credit card originations. The CFPB’s 2024 mortgage origination work focused on evaluating and addressing a variety of fair lending risks, including potential discrimination in mortgage underwriting and pricing processes, and whether there were weaknesses in fair lending-related compliance management systems.”

Background: From the CFPB Supervisory Highlights Summer 2023

In the Fall 2021 issue of Supervisory Highlights, the CFPB discussed findings that mortgage lenders violated ECOA and Regulation B by discriminating against African American and female borrowers in the granting of pricing exceptions based upon competitive offers from other institutions. Since then, Supervision conducted additional examinations assessing mortgage lenders’ compliance with ECOA and Regulation B with respect to the granting of pricing exceptions based on competitive offers from other institutions. The CFPB again found that mortgage lenders violated ECOA and Regulation B by discriminating in the incidence of
granting pricing exceptions across a range of ECOA-protected characteristics, including race, national origin, sex, or age.

Examiners observed that certain lenders maintained policies and procedures that permitted the granting of pricing exceptions to consumers, including pricing exceptions for competitive offers. Generally, a pricing exception is when a lender makes exceptions to its established credit standards. For example, a lender may lower a rate to match a competitor’s offer and retain the consumer. Examiners identified lenders with statistically significant disparities for the incidence of pricing exceptions at differential rates on a prohibited basis compared to similarly situated borrowers. Weaknesses in the lenders’ policies and procedures with respect to pricing exceptions for competitive offers, the failure of mortgage loan officers to follow those policies and procedures, the lenders’ lack of oversight and control over their mortgage loan officers’ discretion in connection with and use of such exceptions, or managements’ failure to take appropriate corrective action risks contributed to the observed disparities in the incidence of granting pricing exceptions. Examiners did not identify evidence of legitimate, non-discriminatory reasons that explained the disparities observed in the statistical analysis.

In several instances, examiners identified policies and procedures that were not designed to effectively mitigate ECOA and Regulation B violations or manage associated risks of harm to consumers. Some policies permitted mortgage loan officers to request a pricing exception by submitting a request into the loan origination system without requiring that the request be substantiated by documentation. While those requests were subject to managerial review, there were no guidelines for the bases for approval or denial of the exception request or the amount of the exception. Other policies had limited documentation requirements—and sometimes no documentation requirements for pricing exceptions below a certain threshold. This meant that the lenders could not effectively monitor whether the pricing exception request was initiated by the consumer and/or supported by a competitive offer to the consumer. Other policies granted some loan officers pricing exception authority up to certain thresholds without the need for competitive offer documentation or management approval. As a result, the lenders did not flag those discretionary discounts as pricing exceptions and did not monitor them. Some policies had more robust documentation and approval requirements. But those institutions did not effectively monitor interactions between loan officers and consumers to ensure that the policies were followed and that the loan officer was not coaching certain consumers and not others regarding the competitive match process. In other instances, examiners determined that loan officers were not properly documenting the initiation source of the concession request nor were they retaining and documenting competitors’ pricing information in borrowers’ files as required
by the lender policy.

Examiners also identified weaknesses in training programs. Some lenders did not have training that explicitly addressed fair lending risks associated with pricing exceptions, including the risks of providing different levels of assistance to customers, on prohibited bases, in connection with a customer’s request for a price exception. Other training programs did not cover pricing exceptions risk for employees who have discretionary pricing authority.

Finally, examiners concluded that management and board oversight at lenders was not sufficient to identify and address risk of harm to consumers from the lender’s pricing exceptions practices. Similarly, examiners observed that some lenders failed to take corrective action based on their statistical observations of disparities in pricing exceptions. Some lenders failed to document whether additional investigation into observed disparities was warranted, review the causes of such disparities, or consider actions that might reduce such disparities.

In response to these findings, the CFPB directed lenders to, among other things: enhance or implement pricing exception policies and procedures to mitigate fair lending risks, including enhancing documentation standards and requiring clear exception criteria; enhance or implement policies requiring the retention of documentation for all pricing exceptions, including document regarding whether the pricing exception request was initiated by the consumer; develop and implement monitoring and audit program to effectively identify and mitigate potential disparities and/or fair lending risks associated with the pricing exception approval process; or to identify and remediate harmed consumers.

Pricing Exceptions Can Be Discriminatory

Pricing exceptions can signify practices that may suggest discriminatory behavior. For instance, a lender serving a local population predominantly comprising higher-income households established a practice of waiving its appraisal fee for transactions exceeding $800,000. 20 percent of the applicants benefitting from this incentive were Black or Brown males; the remainder were primarily self-identified White.

The lender did not provide any pricing accommodations for first-time buyers using down payment assistance. 40% of applicants for the lender’s down payment assistance were Black or Brown, while the remaining applicants were predominantly White.

In terms of racial demographics, the lender granted a higher percentage of pricing exceptions to White males compared to Black or Brown applicants. The lender did not provide any evidence indicating that the price differences were due to concessions. The supervisory agency warned the lender about potentially discriminatory pricing practices.

Regulation B does not prohibit pricing exceptions; it prohibits discriminatory pricing exceptions. However, when lenders fail to document that the pricing exception was a response to an applicant’s request or objection, these exceptions may appear discriminatory. In other words, without documentation that supports the concessionary nature of the exception, pricing disparities may be arbitrary at best and unlawfully discriminatory at worst.

 

 

BEHIND THE SCENES: HUD Launches Fair Housing Investigation into Minneapolis’s Race-Based Housing Plan

WASHINGTON – The Department of Housing and Urban Development’s (HUD) Office for Fair Housing and Equal Opportunity (FHEO) notified the City of Minneapolis that it has launched an investigation into the city’s comprehensive racialized housing plans, which HUD believes may violate the Fair Housing Act and Title VI of the Civil Rights Act of 1964.

“Minnesota is ground zero for fraud and corruption because they have chosen to ignore the law to serve a cynical political agenda. This undermines our American values, united by a common heritage, language, and commitment to equal treatment under law,” said HUD Secretary Scott Turner. “As HUD Secretary, I will continue to deliver on President Trump’s promise to provide affordable housing for American families. HUD will not stand for illegal racial and ethnic preferences that deny Americans their right to equal protection under the law. I am committed to deliver on this promise by thoroughly investigating any housing discrimination involving the city of Minneapolis.”

“Under the feckless leadership of Governor Tim Walz, Minnesota has become a Third World failed state, where criminals engage in massive, unchecked fraud and decent Minnesotans are held captive to the riotous impulses of left-wing cultural arsonists,” said Assistant Secretary for Fair Housing and Equal Opportunity Craig Trainor. “Its largest city, Minneapolis, has fared no better under its clownish mayor, Jacob Frey, whose government may be engaging in unlawful discrimination by prioritizing Minneapolis residents for housing based on race and national origin rather than need. The Trump Administration will ensure Minneapolis fully complies with the Fair Housing Act.”

Examples of the city’s alleged racially discriminatory housing plan are below. Read the full letter notifying the City of Minneapolis of HUD’s investigation here.

  • In the “Minneapolis 2040” plan, the city promises to prioritize housing resources for so-called “cultural districts” – that is, areas “significantly populated by people of color, Indigenous people and/or immigrants.”
  • The city also vows to “focus on people of color” and “indigenous people” when expanding support programs for homeowners.
  • The city’s current Strategic and Racial Equity Action Plan claims to tangibly align “racial equity goals with department plans and budgets. For example, the city’s department of Community Planning and Economic Development promised to leverage its rental licensing authority to prioritize “rental housing for Black, Indigenous, People of Color and Immigrant communities.”

Read Assistant Secretary Trainor’s love letter to Minneapolis Mayor Jacob Frey here: Investigation Notice

 

 

Tip of the Week – Email Your Questions to the Loan Officer School Journal

As the new year begins, the LOSJ has decided it’s time to shake things up a bit and try something different. How about starting a new Dear Abby-like section specifically for mortgage originators?

We invite LOSJ readers to email their questions on any topic to the LOSJ editor. This could include anything related to compliance, sales, marketing, implementation, or other topics that would be beneficial to lenders. Please send your questions to: losjmailbag@gmail.com.

Necessary Mailbag Disclosure: The LOSJ is a periodic publication from LoanOfficerSchool.com designed to educate and inform our readers. It is important to note that we do not provide legal advice, and nothing in the LOSJ should be taken as a legal opinion on specific facts or circumstances. The content serves strictly for informational purposes. We strongly advise readers to consult legal counsel for any legal matters or specific questions they may have.