A mortgage company's policy requires borrowers with credit scores below 620 to provide additional documentation that borrowers with higher scores don't need. During testing, this policy is found to disproportionately affect African American applicants. The company can defend this practice if:
Correct Answer
B) The additional documentation requirement is substantially related to creditworthiness and the least discriminatory alternative available
Under disparate impact theory, even facially neutral policies that disproportionately affect protected classes can violate fair lending laws unless the creditor can prove the practice serves a legitimate business need and no less discriminatory alternative exists. Consistency of application alone doesn't cure disparate impact violations.
Why This Is the Correct Answer
Under disparate impact theory, even facially neutral policies that disproportionately affect protected classes can violate fair lending laws unless the creditor can prove the practice serves a legitimate business need and no less discriminatory alternative exists. Consistency of application alone doesn't cure disparate impact violations.
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Previous Question
In reviewing a loan file, an MLO notices the borrower's signature varies significantly between the initial application and subsequent documents, and the handwriting style appears different. The borrower states they injured their hand. What should the MLO do?
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During a fair lending examination, regulators discover that a lender's automated underwriting system approves white applicants at an 85% rate but approves similarly qualified Black applicants at only a 65% rate. The lender's best defense would be to: