NCRC Files Fair Lending Complaints Against FHA Lenders

Dear Colleagues,

The National Community Reinvestment Coalition has filed twenty two fair lending complaints to the United States Department of Housing & Urban Development Office of Fair Housing & Equal Opportunity challenging FHA lenders discriminatory policies and practices that prohibits people of color and credit worthy Americans from accessing decent and affordable mortgages and refinances via the FHA loan program.

HUD’s press advisory is below.

NCRC is challenging a widespread industry “overlay” practice that requires that consumers who are applying for a FHA loan with 3.5% down payment must have a FICO score of 620, 640 or even 660. The FHA program parameters only require that qualified consumers have a 580 FICO coupled with other responsible underwriting factors. NCRC  conducted fair lending testing of FHA lenders across the country to investigate the matter, coupled with comprehensive research and policy review.

Subsequently,  NCRC sent challenge letters to over fifty lenders who originate FHA loans in a discriminatory manner in violation of the Federal Fair Housing Act, the Equal Credit Opportunity Act and for regulated banks, the Community Reinvestment Act. Notably, while seventeen lenders have agreed to reconsider the issue, the majority are choosing to “dig in” and defend their discriminatory practices. Therefore, NCRC filed discrimination complaints to the United States Department of Housing & Urban Development against the FHA originators who have declined the opportunity to  resolve the issues presented in our letter and complaints. NCRC has also requested that the lenders prudential regulators, the Department of Justice, the CFPB and the FHA investigate the issue.

It is NCRC’s position that FHA mortgage originators are illegally denying access to FHA mortgages across the country despite a 100% government loan guarantee and the ability for lenders to securitize the mortgages into the secondary market through Ginnie Mae.

This practice denies access to credit to working families across the country and discriminates against African American and Latino consumers in violation of our nations Federal civil rights laws.

While the industry is trying to explain away their practices in the attached Ken Harney column and subsequent new coverage, in fact, NCRC due diligence has documented that their explanations do not hold water and are a pre-text for discrimination.

I have also attached a white paper, “Working Families Arbitrarily Blocked from Accessing Credit,” that will give you more details on our concerns and which also lists the lenders we filed against so far. A copy of this paper can also be found on our website, We have not finished our investigations and expect to be filing an additional number of complaints against other top FHA lenders in the country.

I will keep the group informed as to developments.

Happy & healthy holidays, and I apologize for any cross posting.



WASHINGTON – The U.S. Department of Housing and Urban Development announced today that it is launching multiple investigations into the practices of certain mortgage lenders to determine if their home loan policies illegally deny qualified African American and Latino borrowers access to credit.

The investigations are in response to 22 complaints the National Community Reinvestment Coalition (NCRC) filed with HUD alleging that the loan activities of the mortgage originators showed that their home lending practices deny FHA- insured loans to African Americans and Latinos with credit scores as high as 640. Federal Housing Administration (FHA) guidelines allow mortgages to borrowers with credit scores above 580, provided the borrowers have down payments equaling 3.5 percent of the loan amount, or above 500, provided the borrowers have down payments equaling 10 percent of the loan amount.

“FHA is an important vehicle for Americans who want to purchase or refinance a home. We thank NCRC for bringing these complaints to HUD. 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,” said HUD Assistant Secretary for Fair Housing and Equal Opportunity John Trasviña. “HUD will take appropriate action against any lender found to be engaging in discriminatory practices.”

Prior to the recent downturn in the economy, FHA-insured mortgages comprised less than three percent of new home loans. Since the economic crisis, FHA and the Government-Sponsored Enterprises have insured or guaranteed nearly 95 percent of new mortgage loans being originated. By the end of 2008, almost half of new home purchase loans and one quarter of new refinance loans were FHA or Veterans Administration (VA) insured.

According to NCRC, an association of more than 600 community-based organizations that promote access to basic banking services, their fair lending “testers” evaluated the practices of national lenders, financial services corporations, and other regional and local FHA-approved lenders. In the complaints filed on December 7, NCRC states that lenders were chosen according to their market share and volume of FHA loans, as well as through discussions with community leaders.

Under the Fair Housing Act, HUD impartially investigates allegations of housing discrimination and, during every phase of investigations, attempts to settle complaints through conciliation efforts.

FHA was created in 1934 and currently insures more than 6.5 million single family loans. 80 percent of loans insured by FHA in 2010 were to first-time homebuyers and more than 30 percent of home purchase loans were to minority homebuyers.

FHEO and its partners in the Fair Housing Assistance Program investigate more than 10,000 housing discrimination complaints annually. People who believe they are the victims of housing discrimination should contact HUD at 1-800-669-9777 (voice), 800-927-9275 (TTY).