Bureau Issues Bulletin on Fair Lending Practices
WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) is issuing a bulletin to help mortgage lenders avoid illegal discrimination against applicants whose income includes vouchers from the Section 8 Housing Choice Voucher (HCV) Homeownership Program. Discriminating against a consumer because some or all of their income is from a public assistance program may violate federal fair lending protections.
“Everyone deserves the opportunity to qualify for a mortgage that they can afford, based on their stable income,” said CFPB Director Richard Cordray. “Consumers should not be put at a disadvantage just because they receive public assistance.”
The Section 8 Housing Choice Voucher Homeownership Program was created to assist low-income, first-time homebuyers in purchasing homes. The program is funded by the Department of Housing and Urban Development and administered by participating local public housing authorities.
Participating public housing authorities can provide an eligible consumer with a monthly housing assistance payment to help offset homeownership expenses. The CFPB has become aware of financial institutions excluding or refusing to consider income derived from this program during the loan application and underwriting process. The CFPB has also become aware of some institutions only permitting the vouchers to be used for certain mortgage loan products or delivery channels.
The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating against an applicant because some or all of the applicant’s income is from a public assistance program, such as the Section 8 HCV Homeownership Program. Excluding or refusing to consider these vouchers as a source of income categorically, or accepting the vouchers only for certain types of mortgage loans, may violate ECOA and its implementing regulation, Regulation B.
Today’s bulletin offers guidance for lenders in managing their fair lending risk, including the importance of clear underwriting policies, providing training for underwriters and loan originators, and ensuring careful monitoring for compliance with underwriting policies.
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.