July 16, 2015
From time to time, we get reader questions asking whether certain types of income such as public assistance, alimony, or other types of payments might count for or against a borrower trying to apply for an FHA home loan. These are logical concerns; how many potential FHA borrowers might shy away from applying because they mistakenly believe that certain types of income such as public aid might actually count against them when it comes to loan approval?
The rules that govern these issues are found in HUD 4155.2 Chapter One under a heading that discusses federal law known as the Equal Credit Opportunity Act or ECOA. Did you know that ECOA rules prohibit a lender from denying credit to a borrower simply because he or she receives public assistance?
Chapter One of HUD 4155.2 states, “The Equal Credit Opportunity Act (ECOA) prohibits discrimination in the extension of credit
–on the basis of race, color, religion, national origin, sex marital status, or age
–because all or part of the borrowers income derives from public assistance,
or
–because the borrower has, in good faith, exercised any right under the Consumer Credit Protection Act.”
When it comes to alimony, child support, family status, and related issues, FHA loan rules are equally clear:
“The ECOA prohibits a lender from
–making any oral or written statement, in advertising or otherwise, to borrowers or prospective borrowers that would discourage on a prohibited basis a reasonable person from making or pursuing an application
–inquiring whether income stated in an application is derived from alimony, child support, or separate maintenance payments, unless the lender discloses to the borrower that such income need not be revealed if the borrower does not want the lender to consider it in determining the borrowers creditworthiness
–inquiring about the sex, race, color, religion, or national origin of an applicant (except as provided in 12 CFR 202.13 regarding information for monitoring purposes), or
–inquiring about birth control practices, or intentions concerning the bearing and rearing of children, or the capability to bear them.”
These are very important rights to be aware of; borrowers who feel they have experienced discrimination that violates ECOA guidelines, Fair Housing law or any other type of anti-discrimination statute should get in touch with the FHA as soon as possible to discuss the issue and file a complaint.
Borrower complaints are often the only way the FHA and HUD have of knowing if violations have occurred–if the incident doesn’t get reported, it can’t be investigated. Learn more about the HUD complaint system at the HUD official site: http://portal.hud.gov/hudportal/HUD?src=/complaints_home
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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