Sally applied for a real estate loan. The lender can lawfully require her to answer questions in regards to her:
Audio Lesson
Duration: 2:45
Question & Answer
Review the question and all answer choices
marital status.
Marital status is generally protected information that lenders cannot require applicants to disclose, as it could lead to discrimination under fair lending laws. While lenders can ask about joint accounts or dependents, they cannot make loan decisions based on marital status.
race.
Race is a protected characteristic under fair lending laws and cannot be used as a basis for lending decisions. Lenders are prohibited from requiring applicants to disclose their race, and doing so could constitute discrimination.
gender.
income.
Income is actually information lenders can lawfully require applicants to provide as it's essential for determining loan eligibility and repayment capacity. The correct answer is C, not D.
Why is this correct?
Gender is a legitimate question lenders can ask for loan processing purposes, as it helps verify identity and assess risk factors. Unlike marital status, race, or other protected characteristics, gender information is used for statistical reporting and compliance with fair lending laws rather than as a basis for discrimination.
Deep Analysis
AI-powered in-depth explanation of this concept
This question tests understanding of fair lending practices, which is crucial in real estate transactions as financing is often the most complex aspect for buyers. The core concept revolves around what information lenders can legally request from loan applicants under federal and state anti-discrimination laws. In California specifically, lenders must comply with both federal regulations like the Equal Credit Opportunity Act (ECOA) and state laws that prohibit discriminatory practices. The question requires recognizing that while certain personal information is protected from being used in lending decisions, other information is necessary for proper loan underwriting. The challenge lies in distinguishing between protected characteristics that cannot be used as basis for lending decisions and legitimate financial information needed to assess creditworthiness. This knowledge connects to broader real estate concepts including fair housing, loan origination, and consumer protection in real estate transactions.
Knowledge Background
Essential context and foundational knowledge
Fair lending practices are governed primarily by the federal Equal Credit Opportunity Act (ECOA) and California's Unruh Civil Rights Act. These laws prohibit discrimination based on race, color, religion, national origin, sex, marital status, age, or because someone receives public assistance. Lenders must collect certain information for regulatory compliance and statistical reporting purposes, but cannot use protected characteristics as factors in lending decisions. In California, additional protections exist for various classes including sexual orientation and gender identity. Lenders can legitimately request financial information like income, assets, credit history, and employment details to properly assess risk and determine loan qualifications.
G-FIN: Gender, Financial, Income, Necessary
Remember that Gender can be asked, along with Financial information and Income - all necessary for legitimate lending decisions. Other personal characteristics are protected.
For questions about permissible lender inquiries, focus on whether the information is financial in nature or relates to protected characteristics. Financial information is typically permissible while personal characteristics are not.
Real World Application
How this concept applies in actual real estate practice
When assisting a buyer client with a purchase, you might accompany them to a loan application meeting. The loan officer asks about their gender, marital status, income, and employment. While some buyers might question why gender information is requested, you can explain that this is standard practice for compliance reporting and identity verification, unlike questions about race or marital status which are prohibited. Understanding this distinction helps you guide clients through the financing process while ensuring their rights are protected.
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