National Real Estate Exam (PSI)FinancingMedium
A lender denies a mortgage application, citing in part that the applicant's income includes public assistance benefits. Which federal law makes this basis for denial illegal?
- ATruth in Lending Act (TILA)
- BReal Estate Settlement Procedures Act (RESPA)
- CHome Mortgage Disclosure Act (HMDA)
- DEqual Credit Opportunity Act (ECOA)
Show answer & explanationAnswer & explanation
Correct answer: D. Equal Credit Opportunity Act (ECOA)
ECOA prohibits creditors from discriminating against applicants based on receipt of public assistance income, along with race, color, religion, national origin, sex, marital status, and age. RESPA governs settlement costs and disclosures, TILA governs credit cost disclosures, and HMDA requires lenders to report mortgage lending data.
Why the other options are wrong
- A. TILA requires disclosure of credit terms and costs, not discrimination protection.
- B. RESPA regulates settlement procedures and kickbacks, not credit discrimination.
- C. HMDA requires data collection/reporting on mortgage lending, not a prohibition on this practice.
Equal Credit Opportunity Act (ECOA)
A federal law prohibiting credit discrimination based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance income.
- Enforced by the Consumer Financial Protection Bureau
- Covers all types of credit, not just mortgages
- Requires lenders to notify applicants of denial reasons
Memory trick: ECOA: Everyone's Credit is Open Access.