(20hr) Day 3 - ECOA - Case Study

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Case Study:  Meeting HUD's Requirements  

The MLO works for a lender who does a lot of FHA loans and the company has been notified by HUD that the company’s delinquency rate has risen to a point where the HUD Neighborhood Watch ratio puts the company at risk of not being able to originate FHA loans. The MLO has a dilemma. It looks like the initiative she created for the company two (2) years ago to reach out to a particular minority population on the city’s west side is playing a big part in the delinquency ratio and she feels that i is her responsibility to remedy the situation.
The answer seems fairly simple. Modify the initiative to require that those who reside on the west side of the city (a specific minority group) be required to make larger down payments on loans. She thinks if the loan criteria is modified to limit the maximum LTV’s on west side loans to eighty percent (80%). Within ninety (90) days they will see an improvement in loan performance.
Is this an acceptable practice in light of the responsibility to insure the whole company does not lose its FHA capabilities?

9 comments:

  1. No, the solution here targets a racial group with less than equal or favorable loan terms. You'd have to implement these terms unilaterally without regard to racial profiling or geography.

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  2. This would be considered discrimination against a particular race - not acceptable.

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  3. This is discriminatory behavior and would not be acceptable.

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  4. Absolutely not. The remedy targets a specific minority group and geographic location.

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  5. I believe this would not be a good plan as it is targeting a specific geographic area which is a form of reverse redlining correct? Also, it impede on the FHA criteria in taking race into consideration.

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  6. No, this would be a targeting a minority group and geographic area also know as redlining.

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  7. 1 of 1

    This is a clear sign of discrimination and targeting a specific geographic area and is unacceptable

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