A California lender denies a mortgage application and cites the applicant's retirement status and fixed income as indicators of insufficient long-term repayment capacity. The applicant's documented monthly income and liquid assets exceed the lender's standard qualification thresholds. Which federal law is most directly implicated by this denial?
Correct Answer
C) The Equal Credit Opportunity Act (ECOA), which prohibits creditors from discriminating against applicants in any aspect of a credit transaction based on age or receipt of public assistance income
ECOA (15 U.S.C. §1691) and its implementing Regulation B explicitly prohibit discrimination in any aspect of a credit transaction based on age or because income derives from a public assistance program or retirement benefits. A lender may not discount or disqualify income solely because it comes from a pension or retirement account, and may not treat retirement status as a proxy for repayment risk when the applicant otherwise meets qualification standards.
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Related Topics & Key Terms
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Related Concepts
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
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