Reference
Guide to
Regulatory
Compliance
Fair Housing Act
42 USC Ch 45 3601 through 3619
Topics
Coverage
Requirements
Enforcement
Practical Application
Self-Study Questions
The Fair Housing Act was enacted as a part of the Civil Rights Act of 1968. When the
act was passed, it prohibited discrimination based on race, color, religion, sex, and
national origin in all phases of the housing industry. In 1988 the act was amended to
make discrimination based on the familial status or handicap of a person illegal.
The federal regulatory agencies have published regulations to implement the
provisions of the Fair Housing Act that are applicable to the financial services
industry. These regulations primarily are recordkeeping requirements to ensure that
the agencies can monitor institutions and determine whether illegal discrimination is
occurring in housing lending practices.
I.
Coverage—42 USC Ch 45 3604 and 3605
A. The Fair Housing Act applies to any person or entity whose business includes
engaging in real estate-related transactions, such as making or purchasing loans,
or the selling, brokering, or appraising of residential real property. Therefore, all
financial institutions are covered by the prohibitions against discrimination in
housing-related credit
B. All financial institutions are covered by the advertising requirements of the Fair
Housing Act
NOTES
C. Recordkeeping requirements
1. State nonmember banks are governed by the Federal Deposit Insurance
Corporation (FDIC) Fair Housing Regulation found in 12 CFR 338
2. National banks are covered by the Office of the Comptroller of the
Currency (OCC) Fair Housing Home Loan Data System—12 CFR 27
3. Savings associations are governed by the OCC’s Nondiscrimination
Requirements found in 12 CFR 128
II. Requirements
A. Institutions may not discriminate in any phase of a housing-related lending
transaction against persons because of their race, religion, color, national origin,
sex (gender), familial status (having children under the age of 18 living at home),
or handicap
B. Advertising
FRB Board Order on Fair Housing Advertising and Poster Requirements
dated March 20, 1989; FDIC Regulation 12 CFR 338.3 and 338.4; OCC 12
CFR 128.4, 128.5, and 128.9. The OCC found it unnecessary to write a
separate regulation for national banks.
1. Advertisement is broadly interpreted to include statement-stuffers, lobby
brochures, posters, and so forth
2. The Fair Housing logo must appear in all written advertisements for real
estate lending
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3.
4.
5.
All oral advertisements for real estate lending must contain a statement of
nondiscrimination (for example, “Equal Housing Lender”)
No advertising may contain any words, symbols, models or other forms of
communication that express, imply, or suggest a discriminatory preference
or policy of exclusion
The Fair Housing poster (or Equal Housing Lender poster) must be displayed
in the institution’s lobby where deposits are taken or loans are made.
C. Other practices
1. Redlining—Federal courts and regulatory agencies have determined that the
Fair Housing Act prohibits the practice of redlining. Redlining occurs when a
lender provides unequal access to credit, or unequal terms of credit, because
of the race, color, national origin, or other prohibited characteristics of the
residents of the area in which the credit seeker resides or will reside or in
which the residential property to be mortgaged is located.
2. Appraisals—12 CFR 128.2a; FIL 94-12
Appraisal practices may be potentially racially biased and therefore may
cause equal opportunity problems for a lender
a. In the cost approach to value, racial bias may be reflected in
unsupported adjustments for “functional and economic obsolescence.”
Lenders should not assume that, because a home or neighborhood is
over a certain age, large adjustments are appropriate.
b. In the comparable sales approach to value, racial bias may cause an appraiser
to select inappropriate comparables or make inappropriate adjustments
3. Savings association underwriting standards—12 CFR 128.2a
a. All savings associations must have clearly written, nondiscriminatory
loan underwriting standards that are available to the public on request
at each office
b. All underwriting standards and business practices that implement them
must be reviewed annually to ensure equal opportunity in lending
4. Savings association application requirements—12 CFR 128.3
a. No savings association may discourage or refuse to allow, receive,
consider, or process any application, request, or inquiry on any
prohibited basis
b. This rule applies to any person who
i. Makes an application for a loan or other service
ii. Requests forms or papers to be used to make an application for a
loan or service
iii. Inquires about the availability of any loan or service
c. Associations must inform each inquirer of his or her rights to file a
written loan application and receive a copy of the association’s
underwriting standards
5. Racial Steering: the act of deliberately guiding loan applicants or potential
purchasers toward or away from certain types of loans or geographic areas
because of race.
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NOTES
Reference
Guide to
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Topics
Coverage
Requirements
Enforcement
Practical Application
Self-Study Questions
NOTES
D. Monitoring and recordkeeping—National banks subject to the Home
Mortgage Disclosure Act (HMDA)—12 CFR 27 (a) (1)
1. Must update the Home Mortgage Disclosure Act—Loan/Application
Register (HMDA LAR) within 30 business days after the end of each
calendar quarter for applications submitted during the quarter
2. For denied applications, the bank must note the reason for denial
E. Monitoring and recordkeeping—National banks not subject to HMDA—12
CFR 27.3(a)(2)
1. A national bank, not subject to HMDA, that received at least 50 or more
home loan applications during the previous calendar year may choose either
of two recordkeeping systems
a. Maintain the records required of banks subject to HMDA, or
b. For the categories purchase, construction-permanent, and refinance,
record the following home loan information for each decision center
of the bank on the Fair Housing Home Loan Data System Logsheet:
i. Number of applications received
ii. Number of loans closed
iii. Number of loans denied
iv. Number of loans withdrawn by the applicant
2. Home loan applications
a. Include all applications and loans for purchase, permanent financing
for construction, or refinancing of residential real property to be used
for the consumer’s principal dwelling
b. Do not include home improvement loans, loans to purchase vacation
homes, interim construction loans, loans secured by mobile homes that
are not permanently affixed to the real property, loans secured by real
estate but made for other purposes, or loans to purchase vacant lots
3. Timing and coverage
a. Must update the information within 30 calendar days of the end of
each quarter
b. A bank exempt from coverage because it received less than 50 loan
applications, will be covered by this requirement for the next month
following any quarter in which the bank receives an average of more
than four home loan applications per month. (The bank may
discontinue keeping the monthly information following two
consecutive quarters in which the average monthly volume drops to
four or fewer home loan applications.)
F.
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Home loan application requirements for national banks
1. Coverage
a. All applications and loans for purchase, permanent financing for
construction, or refinancing of residential real property to be used for
the consumer’s principal dwelling
b. Does not include home improvement loans, loans to purchase
vacation homes, interim construction loans, loans secured by mobile
homes that are not permanently affixed to the real property, loans
secured by real estate but made for other purposes, or loans to
purchase vacant lots
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2.
Requirements—12 CFR 27.3(b)(1)
a. National banks must attempt to obtain the following information on
completed home loan applications:
i. Loan amount requested
ii. Interest rate requested
iii. Number of months requested to maturity
iv. Location of property, complete address
v. Number of residential units
vi. Year property was built
vii. Purpose of the loan
viii. Name and present address of applicant
ix. Age of applicant
x. Marital status (using terms married, unmarried, or separated)
xi. Number of years employed in present profession
xii. Years on present job
xiii. Gross total monthly income, including base salary, wages,
overtime, bonuses, commissions, dividends, interest, rental
income, retirement or disability income, income from part-time
employment (including income from alimony, child-support, and
separate maintenance after disclosing to applicant that it need not
be listed unless applicant wants it to be considered)
xiv. Proposed monthly housing payment (may include taxes,
insurance, monthly assessments, and utilities if the bank
consistently uses these amounts for computing housing costs)
xv. Purchase price
xvi. Applicant’s total monthly payments on all outstanding liabilities
(including installment debts, real estate loans, and any alimony,
child support, or separate maintenance payments)
xvii. Net worth (applicant’s total assets, including cash, stocks, bonds,
cash value of life insurance, real estate, net worth of business
owned, automobile, furniture, personal property, and so forth,
minus total liabilities, including installment debt, real estate debt,
automobile loans, and so forth)
xviii. Date of application
xix. Sex of applicant
xx. Race or national origin of applicant
b. Disclosures—12 CFR 27.3(b)(2)
i. Must disclose to applicant that the information on sex and
race/national origin is requested by the federal government for
monitoring purposes
ii. May not discriminate on the basis of the information or on the
fact that the applicant chooses not to provide it
iii. If the applicant does not provide the information on race/national
origin and sex, the lender must visually observe the applicant and
note the race and sex
iv. Use of the Federal Home Loan Mortgage Corporation/Federal
National Mortgage Association (FHLMC/FNMA) form
(“Information for Government Monitoring Purposes”)will
constitute compliance with the monitoring information
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c.
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Requirements
Enforcement
Practical Application
Self-Study Questions
d.
e.
NOTES
Bank must keep the following information in its home loan files—
12 CFR 27.3(c):
i. Appraised value (if appraisal was obtained)
ii. Census tract number, if property is in a standard metropolitan
statistical area (SMSA) where the bank has an office (if appraisal
was obtained)
iii. Information on the disposition of the application, including whether
the application was withdrawn before terms were offered, withdrawn
after terms were offered, denied, or terms offered and accepted
iv. Any additional information used by the bank in determining
whether or not to extend credit (including credit reports, federal
tax forms, appraisals, and so forth)
If final terms were offered, also include the following in the file:
i. Loan amount
ii. Whether private mortgage insurance is required and, if so, the
terms of the insurance
iii. Whether a deposit balance is required and, if so, the amount
iv. Note interest rate
v. Number of months to maturity
vi. Points
vii. Commitment date
viii. Type of mortgage (standard fixed payment, variable rate,
graduated payment, rollover, other)
ix. Name of bank office where application was submitted
If the application is denied, maintain the following in the file:
Copy of the Equal Credit Opportunity Act (ECOA) notice and
statement of credit denial
G. Other national bank recordkeeping requirements—12 CFR 27.4 (a)
1. Inquiry/Application Log
a. Coverage
i. The OCC may require the log if there is reason to believe the
bank is participating in illegal discriminatory practices
ii. When requiring a bank to keep a log, the OCC will specify the
location where the information should be obtained, the length of
time it must be maintained, the frequency of submission to OCC,
and the reason for imposing the requirement
iii. If required to keep a log, the bank must keep information on all
inquiries and applications for a home loan or for a governmentinsured loan
b. Requirements
Must keep the following information on the form provided in
Appendix III to the OCC regulation:
i. Date of application or inquiry
ii. Type of loan (purchase, construction-permanent, refinance)
iii. Government-insured and type of insurance
iv. Whether the entry is an application or inquiry
v. Case identification to identify the loan file
vi. Race/national origin
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2.
vii. Location of property (complete street address and census tract if
located in a SMSA in which the bank has an office)
Statistical Analysis prior to OCC Examination
a. Bank will have 30 calendar days after receipt to submit the completed
Home Loan Data Submission Forms
i. OCC will request specific records
ii. Number of records requested will not exceed 250 per decision
center or 2,000 per bank unless there is reason to believe the bank
has been illegally discriminating
b. Purpose is statistical analysis on home loans
c. Requirements
i. Complete and submit Home Loan Data Submission Forms for
the specified records to the OCC within 30 days after receiving
notification
ii. Form is in Appendix IV to OCC regulation
H. Record-retention requirements—National banks—12 CFR 27.5
1. Must keep all application information for 25 months from the date the
applicant is notified of the action taken
2. OCC may extend this record retention requirement
I.
State nonmember banks—12 CFR 338 Subpart B
1. State nonmember banks subject to HMDA must comply with Regulation C
2. All state nonmember banks that receive applications for the purchase or
refinance of a dwelling to be occupied by the applicant as a principal
dwelling must comply with Regulation B and request the applicant’s
a. Ethnicity
b. Sex
c. Marital status
d. Age
III. Enforcement—42 USC 3613 and 3614
A. Civil liability
1. Actual damages
2. Punitive damages as awarded by the court
3. Court costs and attorney’s fees
4. If action brought by U.S. Attorney, may bring penalty of up to $50,000 for
first violation and $100,000 for subsequent ones
B. FIRREA penalties
1. Penalties up to $7,500 per day for violations of laws and regulations
2. Penalties up to $37,500 per day if violations or unsafe or unsound practices are
engaged in recklessly or are part of a pattern of misconduct that causes more
than a minimal loss to the bank or any pecuniary gain to the parties involved
3. Penalties up to $1,425,000 per day against persons who knowingly commit
a violation and knowingly or recklessly cause a substantial loss to the bank
or a substantial benefit to the party
C. Criminal liability
1. If no bodily injury in violation, can be fined up to $1,000 or imprisoned for
up to one year
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2.
3.
If bodily injury, can be fined up to $10,000 and imprisoned for not more
than 10 years
If death results, can be imprisoned for life
D. Administrative enforcement
1. The Department of Housing and Urban Development (HUD) can
investigate complaints of discrimination
2. Regulatory agencies have uniform enforcement policy for compliance with
the Fair Housing Act
Requirements
Enforcement
Practical Application
Self-Study Questions
NOTES
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Practical Application
Fair Housing Poster
NOTES
The Fair Housing Poster must be displayed in the place where the bank accepts
applications for home-related loans or where deposits are made.
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Reference
Guide to
Regulatory
Compliance
Fair Housing Act—Questions
1.
Topics
Coverage
First National Bank owns several pieces of real estate obtained through
foreclosures. Two of these are homes that the bank would like to market and
sell within the community. The bank will also provide financing for these
homes. In addition, the bank owns an apartment complex that it is managing
until it is sold. In relation to these properties, which of the following issues is
NOT a Fair Housing Act issue?
a.
b.
c.
Requirements
Enforcement
Practical Application
Self-Study Questions
d.
2.
In state bank advertisements, on what must Fair Housing logos be placed?
a.
b.
c.
d.
3.
4.
A loan to purchase a mobile home to be used as a vacation home
A home equity line of credit
A loan to purchase vacant land for the construction of a residence
A home purchase loan
Which of the following loans is NOT subject to Fair Housing monitoring
requirements for housing-related loans made by a national bank located outside
a metropolitan statistical area (MSA)?
a.
b.
c.
d.
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Bank communications
Bank advertising
Advertising for home improvement loans
Bank lobby signs
First State Bank, a state nonmember bank, is auditing its recordkeeping
procedures for compliance with the FDIC Fair Housing regulations.
Which loan should be reviewed?
a.
b.
c.
d.
NOTES
Discrimination based on familial status in renting apartments
Accessibility of the apartment complex to handicapped persons
Whether potential buyers of the houses are being discouraged from looking
at the houses because of race or ethnic background
Affordability of the apartments relative to the community immediately
around the complex
A loan to purchase a mobile home
A loan to provide permanent financing for the construction of a residence
A loan to purchase a residence
The refinancing of a home purchase loan
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5.
First National Bank, with assets of $60 million, is located in a large urban area
(which has been designated as an MSA). Which of the following is true of the
bank’s fair housing recordkeeping requirements?
a.
b.
c.
d.
6.
Which of the following national banks must keep an Inquiry/Application Log?
a.
b.
c.
d.
7.
A bank that had 50 or more home loan applications in the previous year
A bank that has $50 million or more in assets
A bank that is located in an MSA
A bank that has been requested by the OCC to keep such a log because of
complaints that its lending practices may be discriminatory
First National Bank is located outside an MSA. It received 120 home loan
applications last year. Which statement best describes the bank’s Fair Housing
recordkeeping requirements?
a.
b.
c.
d.
8.
It must keep an Inquiry/Application Log of all home loans and home
improvement loans.
It does not have to keep any records unless it had at least 50 applications
for home purchase loans during the previous calendar year.
It must keep monthly information on all home loan applications (including
purchase, permanent financing, and refinancing) regarding the number of
applications received, the number denied, the number withdrawn, and the
number of loans closed.
It must keep its HMDA LAR updated quarterly.
It may either keep the Home Loan Data System records, or it may keep the
HMDA LAR information.
It must complete up to 2,000 Home Loan Data Submission Forms per
bank or 250 per decision center and submit them to the OCC within
30 days.
It must keep a HMDA LAR.
It must keep the Home Loan Data System records.
Which of the following is NOT a prohibited basis of discrimination under the
federal Fair Housing Act?
a. Race
b. Disability
c. Religion
d. Sexual orientation
Answers to the self-study questions are at the end of Section II.
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NOTES