A fair lending examination reveals that a lender's minimum credit score requirement of 680 disproportionately excludes minority applicants compared to non-minority applicants. To defend this practice, the lender must demonstrate that the requirement is:
Correct Answer
D) Supported by a legitimate business need and the least discriminatory alternative available
Under disparate impact theory, if a facially neutral policy has a disproportionate adverse effect on a protected class, the lender must prove the practice serves a legitimate business need and that no less discriminatory alternative exists that would serve the same purpose equally well.
Why This Is the Correct Answer
Under disparate impact theory, if a facially neutral policy has a disproportionate adverse effect on a protected class, the lender must prove the practice serves a legitimate business need and that no less discriminatory alternative exists that would serve the same purpose equally well.
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?
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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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During a fair lending examination, regulators use regression analysis to:
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A consumer completed a mortgage application with an MLO 15 months ago but did not proceed with the loan. The consumer's number is on the National Do-Not-Call Registry. Can the MLO call this consumer about a new loan product?