A bank's policy requires a minimum credit score of 720 for all mortgage applicants. Statistical analysis shows this policy disproportionately affects Hispanic applicants, even though the policy is applied equally to all applicants. This scenario represents:
Correct Answer
C) Disparate impact discrimination
This is disparate impact discrimination because a facially neutral policy (applied equally to all) has a disproportionate adverse effect on a protected class. Under the Fair Housing Act and ECOA, policies that have disparate impact can be discriminatory even if there was no intent to discriminate, unless the practice serves a legitimate business need that cannot be achieved through less discriminatory means.
Why This Is the Correct Answer
This is disparate impact discrimination because a facially neutral policy (applied equally to all) has a disproportionate adverse effect on a protected class. Under the Fair Housing Act and ECOA, policies that have disparate impact can be discriminatory even if there was no intent to discriminate, unless the practice serves a legitimate business need that cannot be achieved through less discriminatory means.
More Ethics & Fraud Questions
A lender's mobile app prominently displays a 'pre-qualification' feature that asks for minimal information but generates loan amount estimates that are consistently 20-30% higher than what borrowers actually qualify for when they complete full applications. The app includes a disclaimer that estimates are 'subject to full underwriting.' This practice is most likely:
An MLO discovers that multiple loan applications from different borrowers contain identical handwriting in the signature sections, despite different purported signers. The applications were submitted by different real estate agents. What is the most appropriate immediate action?
A mortgage loan originator receives a lead from a real estate agent about a potential borrower. Before calling this consumer, the MLO must:
An MLO tells Asian applicants that they need larger down payments 'because that's what investors prefer for your type of loan,' while telling similarly qualified white applicants that standard down payments are acceptable. This practice represents:
A mortgage company advertises 'Guaranteed approval for all credit types!' but internally has minimum credit score requirements of 580. This advertisement is problematic because it:
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Previous Question
A lender implements a policy requiring all applicants to have bank accounts at their institution for six months before applying for a mortgage. Statistical analysis reveals this requirement disproportionately excludes Native American applicants from a nearby reservation who traditionally use different financial institutions. To defend this policy, the lender must show:
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Which of the following is NOT one of the three main categories of prohibited conduct under UDAAP?