The foreclosure crisis in this country should create a basis for pause and analysis as to the identity of those that suffer the loss of their home, versus those that, for whatever reason, are successful in rescuing their home and restructuring their mortgage. Years before the current crisis, data compiled under the Home Mortgage Disclosure Act ("HMDA") and various other studies concluded (in 2004) that "minority borrowers were…almost twice as likely to receive a higher rate home loan as non-minority whites." Given those conclusions in 2004, how many of those minority borrowers, who paid higher interest rates than non-minorities, find themselves faced with foreclosure? The answer, I suspect, is many, prompting the next logical question – what can a minority borrower do about it? The answer is – alot.
Under Federal law, namely, the Equal Credit Opportunity Act ("ECOA") and the Fair Housing Act ("FHA"), a lender/creditor may not discriminate against any person in making available a residential real estate loan, or in the terms or conditions of such a transaction, on the basis of race, sex, national origin or religious preference. Recently, litigation has been filed against lenders under both the ECOA and the FHA, alleging that lenders and brokers engaged in a residential mortgage pricing practice that set rates based upon a borrowers’ minority status or sex. This practice caused borrowers to pay certain "discretionary fees" and higher interest rates resulting in higher costs for their mortgage loans, a practice that violates Federal law. Borrowers that are the victim of such practices have a private cause of action against the lender and/or mortgage brokers involved, and can rely upon statistical evidence and data to show that the lender’s practices affects a protected group disproportinately, the so-called "disparate impact" theory.
Federal law provides for "civil liability" against any "creditor" who violates the law and provides for the recovery of actual and punitive damages, as well as attorneys fees. In addition, the laws of the various states where a foreclosure action is commenced may allow for foreclosure proceedings to be enjoined, pending the resolution of a borrowers’ claims. In any event, minorities who believe they may have been the subject of a discriminatory lending practice should actively seek an attorney to explore their various legal options and alternatives. Those borrowers may not only be able to save their home, but recover damages for the illegal lending practices.