Enjoy access to a free NMLS renewal class when you attend an in-person event.
The U.S. Department of Housing & Urban Development (HUD) has announced that it has entered into an Initial Decision and Consent Order with American Bank, resolving HUD’s charge that the Rockville, Md.-based lender discriminated against applicants with disabilities when it allegedly required applicants to provide documentation regarding their disabilities and attempted to obtain information about the nature and extent of those disabilities.
The Fair Housing Act makes it illegal to discriminate in the terms and conditions of a loan to an individual based on a disability, including imposing different application or qualification criteria. The Fair Housing Act also makes it illegal to inquire about the nature or severity of a disability except in limited circumstances.
“Holding homebuyers with disabilities to a higher standard is against the law,” said Gustavo Velasquez, HUD Assistant Secretary for Fair Housing and Equal Opportunity. “Banks may verify income, but they cannot single out homebuyers with disabilities and delay or deny their financing, if they are otherwise eligible.”
The Initial Decision and Consent Order was entered after HUD charged the lender with unlawful discrimination based on disability. A Pierpont, S.D. couple filed a complaint with HUD alleging that the bank required the husband, who has a permanent disability, to provide Social Security Administration documentation proving his disability-related income for the past two years. The letter the man provided had no end date, and stated that his disability income would continue unless the man’s medical condition improved. However, the bank, and its senior mortgage banker, allegedly required such loan applicants with disabilities to provide additional medical documentation proving that they would continue to receive disability income for at least three years.
The couple’s complaint further alleged that the bank required the husband to provide the name and phone number of his physician so it could inquire about the status of the husband’s disability and whether or not he would get better. The man’s doctor subsequently provided a letter stating that the man’s condition is a “permanent condition” and that he “will suffer from the effects of this condition for the remainder of his life.”
During its investigation leading to the charge, HUD determined that at least five other loan applicants with disabilities had faced similar barriers when applying for mortgage loans with American Bank. A complaint by HUD Assistant Secretary Velasquez was filed on behalf of other families and is also resolved by the Order.
Under the Initial Decision and Consent Order, American Bank will pay the couple $25,000, adopt a written policy addressing the income verification requirements for home mortgage loan applicants who receive disability income, and provide fair lending training, including training regarding disability income, to newly hired employees. The Bank will also identify the approximately 2,900 applicants that applied for a loan to purchase or refinance a home between Jan. 1, 2011, and Dec. 31, 2013, and listed Social Security Disability Insurance, Social Security, and/or short-term or long-term disability insurance as a source of income. A third-party administrator hired by the bank will review each application file and identify everyone the bank required to provide information about their medical conditions for income verification purposes. Those applicants may be eligible to receive up to $5,500 in compensatory damages.