A lender requires all loan applicants to have a checking account with their institution for at least 6 months before loan approval. This policy disproportionately affects recent immigrants who may not have established banking relationships. This scenario most likely represents:
Correct Answer
B) Disparate impact because it has a disproportionate effect on a protected class
This represents disparate impact under the Fair Housing Act and ECOA. While the policy appears neutral on its face, it has a disproportionate adverse effect on recent immigrants, who are often part of protected classes based on national origin. The lender would need to demonstrate the policy is justified by business necessity and that no less discriminatory alternative exists.
Why This Is the Correct Answer
This represents disparate impact under the Fair Housing Act and ECOA. While the policy appears neutral on its face, it has a disproportionate adverse effect on recent immigrants, who are often part of protected classes based on national origin. The lender would need to demonstrate the policy is justified by business necessity and that no less discriminatory alternative exists.
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:
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