Buying Your Home:
Settlement Costs and Information
II. Buying and Financing a Home
Processing Your Loan Application
There
are several federal laws which provide you with protection during the processing
of your loan. The Equal Credit Opportunity Act ("ECOA"), the Fair Housing
Act, and the Fair Credit Reporting Act ("FCRA") prohibit discrimination
and provide you with the right to certain credit information.
No Discrimination. ECOA prohibits lenders from
discriminating against credit applicants on the basis of race, color, religion,
national origin, sex, marital status, age, the fact that all or part of
the applicant's income comes from any public assistance program, or the
fact that the applicant has exercised any right under any federal consumer
credit protection law. To help government agencies monitor ECOA compliance,
your lender or mortgage broker must request certain information regarding
your race, sex, marital status and age when taking your loan application.
The Fair
Housing Act also prohibits discrimination in residential real estate transactions
on the basis of race, color, religion, sex, handicap, familial status or
national origin. This prohibition applies to both the sale of a home to
you and the decision by a lender to give you a loan to help pay for that
home. Finally, your locality or state may also have a law which prohibits
discrimination.
Frequently,
there are differences in the types and amounts of settlement costs charged
to the borrower -- for example, some borrowers are charged greater fees
for mortgages depending on their credit worthiness. These differences may
be justified or they may be unlawfully discriminatory. It is important
that you examine your settlement documents closely, especially lines 808-811
on the HUD-1 settlement statement, and do not hesitate to compare your
settlement costs with those of your friends and neighbors.
If you
feel you have been discriminated against by a lender or anyone else in
the home buying process, you may file a private legal action against that
person or complain to a state, local or federal administrative agency.
You may want to talk to an attorney; or you may want to ask the federal
agency that enforces ECOA (the Board of Governors of the Federal Reserve
System) or the Fair Housing Act (HUD) about your rights under these laws.
Prompt Action/Notification of Action Taken. Your
lender or mortgage broker must act on your application and inform you of
the action taken no later than 30 days after it receives your completed
application.
Your application will not be considered complete, and the 30 day period
will not begin, until you provide to your lender or mortgage broker all
of the material and information requested.
Statement of Reasons for Denial. If
your application is denied, ECOA requires your lender or mortgage broker
to give you a statement of the specific reasons why it denied your application
or tell you how you can obtain such a statement. The notice will also tell
you which federal agency to contact if you think the lender or mortgage
broker has illegally discriminated against you.
Obtaining Your Credit Report. The
Fair Credit Reporting Act ("FCRA") requires a lender or mortgage broker
that denies your loan application to tell you whether it based its decision
on information contained in your credit report. If that information was
a reason for the denial, the notice will tell you where you can get a free
copy of the credit report. You have the right to dispute the accuracy or
completeness of any information in your credit report. If you dispute any
information, the credit reporting agency that prepared the report must
investigate free of charge and notify you of the results of the investigation.
Obtaining Your Appraisal. The lender needs to
know if the value of your home is enough to secure the loan. To get this
information, the lender typically hires an appraiser, who gives a professional
opinion about the value of your home. ECOA requires your lender or mortgage
broker to tell you that you have a right to get a copy of the appraisal
report. The notice will also tell you how and when you can ask for a copy.
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