Fair Housing
In Washington, a lender who uses an automated underwriting system that produces discriminatory results may be liable under:
AOnly ECOA, not the Fair Housing Act
BThe disparate impact theory under both ECOA and the Fair Housing Act, even if the system was not intentionally discriminatory✓ Correct
CNo fair lending law because automated systems are neutral
DOnly criminal fraud statutes
Explanation
Even neutral-seeming automated underwriting systems can produce disparate impact discrimination if they disproportionately deny credit to protected class members. Both ECOA and the Fair Housing Act apply to lending, and intent is not required for disparate impact liability.
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Key Terms to Know
Fair Housing Act
Federal law prohibiting discrimination in the sale, rental, or financing of housing based on race, color, national origin, religion, sex, disability, and familial status.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
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