Nearly two dozen mortgage lenders are being investigated because they allegdly require credit scores of at least 620 or 640 on Federal Housing Administration loans. The policy, according to consumer groups, has resulted in discrimination against blacks and Hispanics.
The Department of Housing and Urban Development said it is launching investigations into the alleged discrimination at 22 mortgage lenders. The agency wants to determine whether lending policies at the firms wind up illegally denying loans to the two minority groups.
Complaints have been filed with HUD by the National Community Reinvestment Coalition, an association of more than 600 community-based, consumer-advocate organizations.
“An investigation by the National Community Reinvestment Coalition discovered that a majority of the top 50 FHA lenders have instituted policies that limit access to credit to working families in low- and moderate-income communities, and in communities of color,” NCRC said in a statement. “The investigation’s findings were confirmed in consultation with FHA officials, best practice discussions with industry professionals, and by NCRC’s work directly with consumers and our member organizations around the country.”
The group claims that the lenders are not making FHA loans to consumers with credit scores between 580 and 640 even though FHA will guarantee the loans as long as the credit score is 580.
NCRC says the minimum credit scores at the top lenders are 620 and 640.
The mortgage lenders with the biggest market shares were targeted in the complaints.
“We thank NCRC for bringing these complaints to HUD,” HUD Assistant Secretary for Fair Housing and Equal Opportunity John Trasviña said in HUD’s news release. “For lenders to deny responsible home seekers this source of credit, without regard for their capacity to repay the loans, would raise serious fair housing concerns and, if proven, undermine our nation’s recovery efforts.”
