New York State Department of Financial Services Issues Guidance to Mortgage Lending Institutions to Comply With New York’s Fair Lending Law

New York State Department of Financial Services Issues Guidance to Mortgage Lending Institutions to Comply With New York’s Fair Lending Law

Department Analysis of Certain Mortgage Lenders Reveals Existence of Disparities in Approvals and Denials in Terms of Credit Between Same-Sex and Opposite-Sex Pairs in Mortgage Lending

New Guidance Provides Recommendations on How to Reduce Risk of Discrimination Based on Sexual Orientation

The New York State Department of Financial Services (DFS) today issued new guidance to DFS-regulated mortgage lenders in New York to develop and implement compliance programs, including a fair lending plan, to comply with New York’s Fair Lending Law, Executive Law § 296-a. New York’s Fair Lending Law prohibits discrimination in, among other things, the granting, withholding, extending, or renewing, or in the fixing of the rates, terms, or conditions of any form of credit on the basis of sexual orientation. 

The guidance arises from an analysis conducted by DFS of mortgage loan applications and mortgage loan terms from five large mortgage lenders (four non-depository lenders and one bank) for the years 2016, 2017, and 2018, whereby the Department determined that, in all but two of the fifteen data sets reviewed, same-sex pairs of applicants were denied mortgage loans at higher rates than opposite-sex pairs of applicants. In addition, in six of the data sets, same-sex pairs received between 9 and 17 basis points higher average annual percentage rates than opposite-sex pairs.  

Because any given same-sex pair does not necessarily consist of LGBTQI individuals (e.g., a father and son, two sisters, or two business partners of the same sex), the Department was unable to determine with certainty whether discrimination based on sexual orientation occurred as to any particular same-sex pair within the data set.  However, the Department’s findings raise sufficient concern of the possibility of discrimination against LGBTQI mortgage applicants that the Department is providing this guidance to assist Mortgage Lenders in reducing risk of such discrimination. 

DFS urges Mortgage Lenders to take the following actions to reduce risks of discrimination in terms of access to credit based on sexual orientation:  

  • Vest the Board of Directors and senior management with responsibility for developing a fair lending plan and ensuring that the Mortgage Lender’s practices comply with the plan’s provisions;  
  • Monitor implementation of the fair lending plan and adherence to the plan’s policies and procedures, continually addressing application and underwriting processes as well as pricing policies;  
  • Implement a training program for new hires, current employees and management.  At least semi-annually, provide lending personnel updates on fair lending issues.   
  • Ensure automatic and timely review by a higher-level supervisor of all rejected or withdrawn applications for loans from same-sex pairs who indicated that they would live together in the mortgaged property; 
  • Extend, in writing, the principles of the fair lending plan to the Mortgage Lender’s refinancing and collection practices; and 
  • Periodically review and update the fair lending compliance program and fair lending plan, including periodic review by senior management, to ensure that they remain current.  

In the guidance, the Department also recommends mortgage lenders take several compliance actions, including utilizing rate sheets and exception logs to document applications from same-sex pairs who indicated they would live together in the mortgaged property, documenting approved loans for such same-sex pairs that received less favorable terms than applicable rate sheets would otherwise determine, and, depending on the size and complexity of the institution, conducting statistical and regression analysis of loan data – to prevent potential discrimination on the basis of sexual orientation.  

The Department will continue to conduct fair lending examinations to review lending programs where appropriate and to take any other supervisory or enforcement actions necessary to ensure that lending in New York State complies with all applicable fair lending laws. 

For a full list of Department recommendations in the guidance letter, visit the DFS website.  


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