A mortgage lender's statistical analysis shows that their denial rate for Native American applicants is 15% higher than for white applicants with similar credit profiles. However, the lender's overall portfolio performance is strong, and they argue this difference reflects unmeasured risk factors. Under current fair lending enforcement standards, this situation would:
Correct Answer
B) Require the lender to demonstrate a legitimate, non-discriminatory reason for the disparity
Significant statistical disparities in lending outcomes between protected classes and control groups create a prima facie case of discrimination under disparate impact theory. The lender must then provide a legitimate, non-discriminatory explanation for the disparity. Portfolio performance alone doesn't justify discriminatory outcomes, and unmeasured risk factors must be specifically identified and validated.
Why This Is the Correct Answer
Significant statistical disparities in lending outcomes between protected classes and control groups create a prima facie case of discrimination under disparate impact theory. The lender must then provide a legitimate, non-discriminatory explanation for the disparity. Portfolio performance alone doesn't justify discriminatory outcomes, and unmeasured risk factors must be specifically identified and validated.
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A borrower's employment verification shows they work for a company, but when the MLO calls the main company number, the receptionist has never heard of the borrower. However, the direct number on the verification form reaches someone who confirms employment. This situation suggests:
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An MLO discovers that a borrower provided accurate information, but the loan processor internally altered the debt-to-income ratio to make the loan appear to qualify. What is the MLO's obligation?