On every mortgage loan application there is a section of questions that can feel a bit uncomfortable to ask and answer. Most people expect to answer questions about how much money they make, how much they have tucked away in a bank account and what their credit card debt looks like. It’s a financial transaction, after all. Financial questions ought to be in there. But race? Ethnicity? Which gender I identify with… what does that have to do with a mortgage approval?
And the answer is: Nothing at all.
Questions about race, gender, age, ethnicity, etc. have nothing to do with the mortgage approval process. Even though the questions are asked and answered right there in the same paperwork as your car payment and income, nothing in that section is used as a factor in evaluating whether you are a good candidate for a mortgage loan.
Why are they there at all? To protect you.
You see, in our country’s efforts to protect citizens from unfair biases in the lending world, it became apparent that we couldn’t fix what we couldn’t see. We needed to be able to track the lending opportunities offered within communities in order to catch unfair practices and do something about it. In 1975 the Home Mortgage Disclosure Act (HMDA) was passed, giving the public and financial regulators information to make sure financial institutions were providing access to residential mortgage loans in their communities. This was expanded to include questions that could help identify discriminatory lending patterns. After the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was passed in 2010, new questions were added to help spot troublesome trends. In January 2018 even more additional questions became a requirement.
What should I do when I come across these questions?
It’s up to you how you choose to respond, and your choice won’t make any difference on whether your mortgage loan is approved. Maybe you take the view that the more accurately these questions are answered, the better the statistics will be, and you’re doing your part to help mortgage lending be as fair as possible. Or perhaps you’re uncomfortable identifying yourself in those terms and would rather not give an answer. This is an option that you’re welcome to choose. Either way is fine. If you do choose to answer, though, please answer honestly.
Here’s a fact that not many people know, going into a mortgage application meeting: If you meet with your Loan Officer in person and decline to answer the HMDA questions, your Loan Officer is required to make a best guess and answer the questions for you.
If you have questions or feel uncomfortable about the HMDA questions, talk to your Loan Officer about your concerns. They’ll be able to talk to you and explain your options.