A lender's policy requires all applicants to provide tax returns, but makes an exception for applicants with income over $200,000 who can provide alternative documentation. An applicant earning $150,000 claims this policy discriminates based on income level. Under ECOA:
Correct Answer
C) This violates ECOA only if it has a disparate impact on protected classes
While income level itself is not a protected characteristic under ECOA, policies that treat applicants differently based on income could violate ECOA if they have a disparate impact on protected classes. The key test is whether the policy affects protected groups disproportionately, not whether it creates different treatment based on non-protected characteristics.
Why This Is the Correct Answer
While income level itself is not a protected characteristic under ECOA, policies that treat applicants differently based on income could violate ECOA if they have a disparate impact on protected classes. The key test is whether the policy affects protected groups disproportionately, not whether it creates different treatment based on non-protected characteristics.
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A borrower has a monthly gross income of $8,000. Their existing monthly debt payments total $2,000, and the proposed mortgage payment (including principal, interest, taxes, and insurance) will be $2,500. What is the borrower's debt-to-income ratio for QM purposes?