Disparate Impact, HMDA, and Compliant Marketing
Disparate treatment: Different treatment of similarly situated borrowers based on a protected class. The pattern of outcomes can establish disparate treatment — intent is relevant but not always required. Disparate impact: A neutral policy that disproportionately harms a protected class without business justification. Example: A minimum loan amount policy that, in practice, excludes high-concentration minority neighborhoods. Redlining: Avoiding serving borrowers in certain geographic areas because of the racial or ethnic composition of those areas. Can be active (explicit policy) or passive (CRA activity maps show concentration in majority-white areas, absent from minority areas). Steering Product steering: Offering FHA at higher cost to a borrower who qualifies for conventional based on demographic assumptions. Geographic steering: Recommending neighborhoods or discouraging interest in properties in certain areas based on demographic characteristics. Both are violations even if the LO believes they are acting in the borrower's interest. Comparative File Reviews Pull a sample of approvals and denials, analyze credit profiles for approved vs. denied borrowers, and look for cases where a minority applicant was denied while a similarly situated non-minority applicant was approved. If you were subject to such a review, would your approval/denial decisions be explainable purely on credit factors?