When you complete your mortgage loan application, you may notice some seemingly out-of-place questions about your race, ethnicity, and gender. Seeing these questions may have you wondering “Why in the world does my lender need this information about me?”. You’re not required to provide this information, but as it turns out, these questions exist to protect you, the borrower, so let’s get into the how and why.
Why? Anti-Discriminatory Legislation
The 1974 Equal Credit Opportunity Act (ECOA) prevents lenders from discriminating against potential borrowers based on race, national origin, gender, age, marital status, or because the borrower receives public assistance, while the 1975 Home Mortgage Disclosure Act (HDMA) establishes that lenders must collect, report, and disclose data about the mortgages they originate. These laws considered together help to prevent discrimination against borrowers and hold lenders accountable.
To enforce this, government agencies need to be able to gather data on who is and isn’t being approved for loans. Therefore, when you fill out your mortgage application, you identify your age (through date of birth) and are asked to identify your race, ethnicity, gender, and marital status. If you complete your application in person and choose not to complete the race, ethnicity, and gender questions, federal law does require your lender to note the information based on visual presentation and last name.
How do these questions protect me?
Today, the Consumer Financial Protection Bureau (CFPB) uses the demographic data gathered from loan applications to determine if and where discrimination is occurring.
If providing demographic information on your loan application gave you pause, try not to fret! These are required questions meant to protect you, the borrower, from experiencing discrimination during the home financing process. When you’re ready to begin the process or continue on with your application, get started here!
