A mortgage company's automated underwriting system consistently approves fewer applications from borrowers in ZIP codes with majority African American populations, even when controlling for credit scores and income. The company states they had no knowledge of the demographic composition when programming the system. This most likely constitutes:
Correct Answer
C) Disparate impact because the system produces discriminatory results regardless of intent
This represents disparate impact under the Fair Housing Act. Disparate impact discrimination does not require proof of discriminatory intent. Even though the system appears neutral and the company claims no knowledge of demographics, the discriminatory results affecting a protected class (race) can still violate fair lending laws. The company would need to justify the system's criteria with legitimate business necessity.
Why This Is the Correct Answer
This represents disparate impact under the Fair Housing Act. Disparate impact discrimination does not require proof of discriminatory intent. Even though the system appears neutral and the company claims no knowledge of demographics, the discriminatory results affecting a protected class (race) can still violate fair lending laws. The company would need to justify the system's criteria with legitimate business necessity.
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A borrower submits an application with income documentation that shows round numbers (exactly $5,000 per month) for 24 consecutive months with no variation. The borrower is self-employed and claims this represents consistent contract work. What should trigger SAR consideration?
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