I had an old friend that used to sell home alarm systems. At a time when newborn babies were announced in the local papers – he would look up their address in the yellow pages to find their address. Armed with his best sport coat, he would knock on their door and politely ask for a moment to explain home alarm technology. Sometimes he was invited in, sometimes, he gave the pitch at the front door, and of course, sometimes the door would be quickly closed. No matter what happened, he always got out of his closing line. “Don’t tell me your newborn baby’s safety isn’t worth $19.99 a month!” He sold many home alarm systems.
The Equal Credit Opportunity Act (ECOA) is a federal law that regulates lending practices in the United States and prohibits lenders from discriminating against borrowers on the basis of certain protected characteristics. These characteristics include race, gender, age, national origin, religion, sex, and familial status, as well as pregnant women. The ECOA applies to all types of credit, including mortgages, and requires lenders to provide equal access to credit opportunities to all borrowers.
One aspect of the ECOA that is particularly relevant for mortgage companies is the implied prohibition on using life events as marketing triggers. Life events, such as getting married or having a child, are considered protected characteristics under the ECOA and therefore should not be used as a basis for marketing or lending decisions. This is to ensure that all borrowers are treated fairly and have equal access to credit, regardless of their personal circumstances.
Under the terms of ECOA, choosing to include or exclude someone from receiving marketing based on the protected characteristics of marriage, divorce, or a woman choosing to have children, is restricted under the same rules that restrict including or excluding people based on the characteristics of race, gender, national origin, or religion -- If you would be uncomfortable including or excluding them based on their race or ethnicity, you should have that same consideration for the other characteristics as well.
Using some of these “life events” as marketing triggers could potentially lead to unfair lending practices, as it could result in some borrowers being excluded from credit opportunities based on their life circumstances. This could have negative consequences for those borrowers, as access to credit is often important for financial stability and security.
Overall, the ECOA and other federal mortgage regulations play a critical role in protecting the rights of borrowers and promoting fair lending practices in the mortgage industry. By complying with these rules, mortgage companies can help to ensure that all borrowers have equal access to credit opportunities and can achieve financial stability and security.
To ensure compliance with the ECOA and other federal mortgage regulations, it is important for mortgage companies to review and update their strategies. This may involve reviewing marketing practices to ensure that they do not discriminate against borrowers based on protected characteristics.
Violating the Equal Credit Opportunity Act (ECOA) can result in significant penalties and fines for lenders. It is tempting to arm yourself with your best sport coat and go door-knocking on every contact that may have a life event. Don’t tell me your license and integrity as a mortgage professional isn’t worth more. We must consider the ramifications of and responsibility we have due to the significance of this data. There is a way to find closed loans in your contacts and stay above reproach. How do we know - because we have mastered it.
Sources: Equal Credit Opportunity Act, 15 U.S.C. § 1691 et seq. Fair Housing Act, 42 U.S.C. § 3601 et seq.