Fair Lending Policy
Revision Date: 3/15/2021
Fair lending laws and regulations prohibit creditors from considering an applicant's race, color, national origin, religion, sex, familial status, or disability when considering applications for residential mortgage loans. Fair lending laws and regulations guarantee the same lending opportunities to everyone. The Fair Housing Act, as amended, prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and disability. The Secretary of Housing and Urban Development (HUD) is responsible for administering the Fair Housing Act, including regulations on gender identity . The Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B, prohibit discrimination in any aspect of a credit transaction on the basis of race; religion; national origin; sex; marital status; sexual orientation; gender identity; age (provided that the applicant has the capacity to enter a binding contract); the applicant's receipt of income through a public assistance program; and the good faith exercise of the applicant of a right under the Federal Consumer Credit Protection Act. Various state laws also govern fair lending and prohibit creditors from discriminating against loan applicants on prohibited bases.
The following definitions apply for this Policy.
• Discrimination or Discriminatory practice - means an act that is unlawful under the Fair Housing Act or ECOA . These provisions pertain to: discrimination in the sale or rental of housing and other prohibited practices; discrimination in residential real estate-related transactions; discrimination in the provision of brokerage services; and interference, coercion, and int imidation . Furthermore, discrimination or discriminatory practices include any form of discrimination, including but not limited to the following:
• Overt Discrimination - occurs when a creditor openly discriminates on a prohibited basis or makes statements indicating a discriminatory preference.
• Disparate Treatment- occurs when a creditor treats a credit applicant differently based on a prohibited basis. It does not require proof that the disparate treatment was motivated by prejudice or an intent to discriminate against the applicant.
• Disparate Impact - occurs when a creditor employs a neutral policy or practice equally to all credit applicants, but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis. Even if a policy or practice that has a disparate impact on a prohibited basis can be justified by business necessity, it still may be found to be in violation if an alternative policy or practice could serve the same purpose with less discriminatory effect. Finally, evidence of discriminatory intent is not necessary to establish that a creditor's adoption or implementation of a policy or practice that has a disparate impact is in violation of ECOA.
• Familial status - means one or more individuals (who have not attained the age of 18 years) being domiciled with: a parent or another person having legal custody of such individual or individuals; or the designee of the parent or other person having legal custody, with the written permission of such parent or other person. The protections afforded against discrimination on the basis of familial status apply to any person who is pregnant or is in the process of securing legal custody of any individual who has not attained the age of 18 years.
• Gender Identity- means actual or perceived gender-related characteristics.
• Handicap - means, with respect to any person: a physical or mental impairment which substantially limits one or more of such person's major life activities; a record of having such an impairment; or being regarded as having such an impairment .
• Sexual Orientation - means homosexuality, heterosexuality, or bisexuality.
3. Policy Statement
The responsibility to comply with fair lending laws lies with Executive Management. Ross Mortgage prohibits discriminatory lending which includes, but is not limited to the following discriminatory practices:
• Discouraging applications or rejecting applications because of race, color, religion, national origin, sex, marital status, sexual orientation, gender identity, age, or because applicant receives public assistance;
• Considering race, sex, or national origin, although applicants may be asked to disclose this information to comply with government monitoring requirements. Immigration status and whether applicant has the right to stay in the country long enough to repay the debt may be considered;
• Imposing different terms or conditions on a loan, such as a higher interest rate or higher fees, based on race, color, religion, national origin, sex, marital status, sexual orientation, gender identity, age, or because of receipt of public assistance;
• Asking if the applicant is widowed or divorced. The terms married, unmarrie d, or separated may only be used when gathering information on the applicant;
• Asking about marital status if an applicant applies for a separate account. This information may be asked for if an applicant applies for a joint account;
• Asking for information about the applicant's spouse, except if: o a spouse is applying with the applicant;
• a spouse will be allowed to use the account;
• an applicant is relying on the spouse's income or on alimony or child support income from a former spouse; and/or
• the applicant lives in a community property state;
• Asking about plans for having or raising children. Questions may be asked about expenses related to dependents;
• Asking if the applicant receives alimony, child support or separate maintenance payments, unless the applicant is first informed that he/she does not have to provide this information if the applicant will not be relying on these payments to obtain credit. The applicant may be asked about whether the applicant is required to pay alimony, child support or separate maintenance payments;
• Considering age and/or favoring an applicant because of age, unless the applicant is too young to sign a contract (under 18) or is at least 62 (reverse mortgage);
• Considering the racial composition of the neighborhood where the applicant wishes to buy, refinance, or improve a house with the money being borrowed;
• Refusing to consider a reliable public assistance income in the same manner as considering other income;
• Discounting income because of applicant's sex or marital status;
• Discounting or refusing to consider income because it is derived from part-time employment, Social Security, pensions, or annuities;
• Refusing to consider reliable alimony, child support or separate maintenance payments. Applicant may be asked for proof that this income is consistently received.
• Failing to provide information or services, or providing different information or services to applicants in any aspect of the lending process, including credit availability, application procedures, or lending standards;
• Discouraging or selectively encouraging applicants with respect to inquiries about or applications for credit;
• Refusing to extend credit or using different standards in determining whether to extend credit to applicants based on a prohibited basis;
• Varying the terms of credit offered, including the amount, interest rate, duration, or type of loan based on a prohibited basis;
• Using different standards to evaluate collateral offered by applicants based on a prohibited basis;
• Treating any borrower differently in servicing a loan or invoking default remedies; and/or
• Using different standards for pooling or packaging a loan in the secondary market based on a prohibited basis.
Ross Mortgage is an equal opportunity institution and believes in consistent fair lending. Ross Mortgage does not permit discrimination of any kind with respect to an applicant's race, color, religious creed, national origin, sex, marital, or familial status, sexual orientation, gender identity, age (provided that applicant had the capacity to enter into a binding contract), genetic information, ancestry, children, veteran status, physical condition, developmental disability, handicap or because all or a part of the applicants income derives from any public assistance program. Ross Mortgage does not discourage the completion or submission of an application for credit by any applicant on any of the prohibited basis and does not discriminate against any applicant on a prohibited basis. Furthermore, Ross Mortgage's Fair Lending Policy is designed to prevent practices that could result in any form of discrimination.
A. Non-Discrimination for Same Sex Married Couples and Sexual Orientation or Gender Identity
The Department of Housing and Urban Development (HUD) requires that its core programs be open to all eligible individuals and families regardless of sexual orientation, gender identity, or marital status. Furthermore, the Consumer Financial Protection Bureau (CFPB) issued guidance that it recognizes that all marriages valid, including same sex marriages, for the purposes of federal statutes and regulation under the CFPB's jurisdiction. The CFPB recognizes and will use the terms "spouse", "marriage", "married", "husband", "wife" and other similar terms related to family or marital status to include same-sex marriages and same-sex spouses. Ross Mortgage recognizes all marriages and civil unions and treats same-sex couples in the same manner as heterosexual couples. Same-sex couples who indicate they are married or have entered into a civil union are provided, and should complete, a joint loan application. Proof of legal marriage or civil union is not required for either same-sex or heterosexual couples regardless of the laws in state in which they were married or reside.
Ross Mortgage, in accordance with HUD's policy, prohibits all employees from inquiring about the sexual orientation or gender identity of a loan applicant for any purpose, especially for the purpose of determining an applicant's eligibility for a loan. Ross Mortgage does not prohibit any applicant from voluntarily self-identifying sexual orientation or gender identity (such as for compliance with data collection requirements of state or local governments or other federal assistance programs).
B. Non-Discrimination for Applicant's Receiving Disability Income
The CFPB issued guidance regarding creditor's obligations under ECOA for consideration of public assistance income and relevant standards and guidelines regarding verification of disability income received by mortgage applicants. ECOA and Regulation B prohibit creditors from discriminating in any aspect of a credit transaction against an applicant because all or part of the applicant's income derives from a disability or public assistance program. Such income includes, but is not limited to, Social Security Disability Income and Supplemental Security Income. Creditors must be cautious to avoid requiring documentation beyond that required by agency or secondary market standards to demonstrate whether disability income is likely to continue, such as information about the nature of an applicant's disability or a letter from an applicant's physician. Requiring additional documentation regarding public assistance or disability recipients that is not imposed on other applicants may result in disparate treatment. Furthermore, requiring additional documentation could have a disparate impact violating ECOA and Regulation B if an income verification standard has a disproportionately negative impact on a prohibited basis, even when the creditor does not intend to discriminate. Ross Mortgage considers disability income as a valid source of income for all applicants and will verify income and apply consistent eligibility standards when determining whether an applicant can reasonably be expected to continue paying a mortgage.
Ross Mortgage will adhere to the following standards when verifying disability income:
• Follow Fannie Mae, Freddie Mac, HUD, VA, or USDA agency standards as well as the guidance of the CFPB Underwriting Standards, when applicable, for documentation of disability income.
• Consider disability income effective and likely to continue if the Social Security Administration Notice of Award or equivalent document does not have a defined expiration date.
• Not request additional documentation from the applicant to demonstrate continuance of disability or Social Security disability income.
• Not inquire into or request documentation concerning the nature of a disability or medical condition of the applicant or seek a statement from a physician defining how long the medical condition will last.
C. Pregnancy and Parental Leave
The Fair Housing Act, enforced by HUD, prohibits housing discrimination based on a person's sex or familial status. It is designed to protect applicants from being discriminated against because an applicant is on pregnancy or parental leave and he or she intends to return to work or can otherwise continue to meet the income requirements to qualify for the loan. When an applicant's employer confirms that the applicant is currently on parental leave, the applicant will be considered employed. Ross Mortgage may verify income and will use consistent eligibility standards for all applicants when determining whether an applicant can reasonably be expected to continue paying a mortgage. Employees, in accordance with the underwriting guidelines of agencies, may approve the loan application of an applicant on parental leave when the application meets applicable underwriting requirements and the applicant qualifies for the loan and meets the applicable debt-to-income ratios, taking into account any reduction of income due to their leave and available liquid reserves. Employees are prohibited from asking an applicant whether he or she intends to take parental leave in the future and cannot deny or delay loans to pregnant applicants or applicants on parental leave for which they would otherwise be eligible.
4. Implementation of Fair Lending Policy
The Compliance Manager is responsible for implementing this Policy. The Compliance Manager and Senior Management will periodically review this Fair Lending Policy to ensure that it remains current. The Compliance Manager is also responsible for:
• training employees concerning this Policy;
• reviewing marketing and advertising materials and campaigns and any major new policy or practice, to determine whether those materials, campaigns, policies and/or practices will be consistent with fair lending practices;
• reviewing underwriting standards and its implementation of those standards to determine whether they are compliant with its commitment to fair lending;
• reviewing loan applications and portfolio to ensure compliance with this Policy and credit is extended on a nondiscriminatory basis.
• reporting findings and any issues with respect to its implementation of this Policy to Executive Management on an annual basis or whenever fair lending or pricing issues arise that need to be addressed.
5. Fair Lending Monitoring and Testing
Ross Mortgage will monitor the implementation of and adherence to this Fair Lending Policy. Ross Mortgage will also monitor, on an ongoing basis, the mortgage application and underwriting processes, pricing policies and marketing. Ross Mortgage will ensure that employees understand their duties and responsibilities under the Policy, and that such duties are being carried out.
Ross Mortgage maintains a fair lending testing program to assist in monitoring compliance with fair lending laws. This may include, but is not limited to, periodic statistical analysis, testing for trends, and, where appropriate, loan-level file reviews. Results are reported to the Compliance Manager and any identified issues are immediately addressed.
Employee training is an essential component of this Policy. Ross Mortgage will provide fair lending training annually to all employees, including current employees, new hires, and management. Records of training materials and attendance will be maintained. Fair lending training for employees should include, but is not limited to, the following:
• ECOA, Fair Housing Act, and any state specific requirements.
• Customer assistance skill training, such as listening, responsiveness, and uniform standards such as application interviews, and phone, fax, and mail communications.
• Discrimination sensitivity, such as diversity training, examples of implied discrimination, and encouragement versus discouragement.
Management should also attend conferences, webinars, and seminars on fair lending topics to remain current on consumer credit and fair lending regulations.
7. Application Process
All employees, including loan originators, loan processors, and underwriters, must treat all applicants in the same manner to the extent permitted by applicable law. Employees must provide the same level of assistance to all applicants and ensure that they treat applicants consistently without regard to their race or color, national origin, religion, sex, marital status, sexual orientation, gender identity, familial status, age, or handicap, or any other prohibited basis.
Underwriting guidelines are established in accordance with the loan product the applicant selects and are based upon applicable Ross Mortgage or investor requirements to ensure consistency between all classes of applicants. All underwriters must comply with the same underwriting requirements. Applicants are notified of an underwriting decision, whether favorable or adverse, within 30 days after receiving a completed application.
B. Second Level Review of Adverse Action
When an employee recommends declination for an application, there must be timely review of the decision by a separate designated underwriter or supervisor. The second level review is performed to:
• ensure consistency in loan decisioning and level of assistance;
• prevent erroneous denial of loans;
• determine whether written guidelines were followed;
• explore potential alternatives, such as other loan products or other acceptable means of documenting employment history or income sources; and
• identify training opportunities for employees, underwriters, and other credit administration employees.
The second level review must be conducted prior to the date the adverse action notice is sent to the applicant.
Ross Mortgage reviews its pricing policy and practices to ensure that its pricing policies do not discriminate against any loan applicant on the basis of race, color, religion, national origin, marital status, sexual orientation, gender identity, age (providing the applicant is of legal age and has the capacity to enter into a binding legal contract), sex, gender identity, disability, familial status, receipt of public assistance, or if the individual has exercised in good faith any right under the Consumer Credit Protection Act, or on any other prohibited basis. Pricing is set by the secondary marketing department in accordance with its established pricing policy. Adjustments to pricing can only be made through the secondary marketing department and must be documented. Deviations from published pricing may only be approved with legitimate reasons based upon prevailing market conditions, risk factors, and other considerations associated with a particular loan. These considerations include loan-to-value ratio, debt-to-income ratio, credit score, loan type, the relationship of the applicant with Ross Mortgage, unique factors applicable to the loan, the options and alternatives for the loan, the risk that the loan will not close, competing offers (or the potential) for the applicant, specific or unique needs of the applicant, the cost of originating the loan, and overall market trends. Approvals for deviations from published pricing should be documented and retained by Ross Mortgage. When negotiating the pricing for a loan, all applicants will be treated equally without regard to race, religion, national origin, gender, gender identity, sexual preference, age, disability, marriage status, and/or any other protected characteristics. Loan originators are expected to pursue the most favorable pricing for applicants and act in a consistent manner with all applicants. When a loan originator is aware that compensating factors exist that could improve pricing, the loan originator is expected to counsel the applicants regarding potential options. Loan originators should realize that Ross Mortgage monitors pricing and that loan originators who are found to have violated the pricing policy by considering improper criteria, not acting in Ross Mortgage's best interests, or not acting in the best interests of the applicant may be subject to discipline and/or termination as determined at Ross Mortgage's discretion.
9. Compensation Practices, Anti-Steering Rules and Loan Products
Ross Mortgage follows the compensation rules for loan originators set forth in Regulation Zand does not pay loan originators based on the terms and conditions of the loan. Loan originators are also prohibited from steering applicants to products that will pay them a higher commission and should present no more than four loans per type of transaction. Loan originators must attempt to determine the applicant's needs, both short-term and long-term in order to provide sufficient information to applicants to enable them to make an informed decision regarding the type of loan for which they would like to apply. Applicants are free to select the type of loan they wish to obtain, provided they meet applicable requirements. Loan originators must explain the requirements for various types of loans and how different products may be suitable or unsuitable for the applicant's goals. Loan originators must also explain how and why an applicant may qualify for one type of loan, but not another type of loan, and the underwriting standards that typically would qualify the applicant for a particular loan product. Ross Mortgage offers a broad product offering designed to meet the needs of its customers. Loan Product availability, limitations, or changes are reviewed for possible fair lending disparate impact. In the event nontraditional mortgage products covered by the lnteragency Guidance on Nontraditional Mortgage Product Risk are offered, Ross Mortgage will ensure applicants fully understand the product terms. Furthermore, applicants will be presented with information regarding conventional or conforming loan products for which the applicant may also be eligible before the applicant selects a nontraditional product.
New advertising material, and any changes to existing advertising material, including Ross Mortgage's websites, are reviewed prior to distribution to ensure that advertisements comply with federal and state regulations including fair lending laws. Additionally, if pre-screened advertisement offers are conducted, the criteria for pre-screening will be reviewed prior to implementation to ensure that discriminatory criteria are not used in marketing to potential customers. Advertisements may not contain any words or phrases, photographs, illustrations, or symbols that indicate that applicants from protected classes are less desirable or that Ross Mortgage is unwilling to lend to protected classes. Advertisements may also not be targeted in an inappropriate manner to protected classes (i.e., by promoting more expensive loan products to a protected class). All advertisements, including brochures and handouts, must contain the fair housing slogan and/or logo, as appropriate, for the size and medium of the advertisement.
11. Third-Party Loan Originators
Ross Mortgage will require third-party loan originators to adhere to fair lending requirements. Ross Mortgage will ensure third-party loan originators are aware of its Fair Lending Policy and will require third party loan originators to certify in writing that they acknowledge their responsibility to comply with fair lending requirements as applicable to them. Third-party agreements will be reviewed and updated regularly to maintain compliance with applicable fair lending laws and regulations.
12. Servicing, Loan Modifications and Collection Practices
To the extent that Ross Mortgage engages in any loan servicing or collection activities, it recognizes that the Fair Lending Policy applies throughout the mortgage loan life cycle. Ross Mortgage is committed to implementing policies, procedures, training, and management oversight to ensure equitable treatment of all borrowers during the loan servicing phase of the mortgage loan.
Ross Mortgage takes any complaint about its fair lending practices seriously. All complaints relating to alleged fair lending violations will be resolved without being unduly burdensome to the applicant. Ross Mortgage will process each complaint fairly and consistently and within the time frames required by law, by the relevant government or state regulatory department, or by Ross Mortgage's internal policy and procedures, whichever is earli er.
Upon receipt of a fair lending complaint the following steps are taken:
• Ross Mortgage will act on oral or written complaints immediately. All complaints will be referred to the Compliance Manager.
• The Compliance Manager or designee will forward a response to the consumer and, if appropriate, the relevant government or state regulatory department acknowledging receipt of the complaint and that a formal response will be forthcoming.
• The Compliance Manager or designee will thoroughly review and investigate complaints.
• The Compliance Manager or designee will maintain complete documentation concerning the complaint and the results of investigat i ons.
• When the investigation is complete, a response will be sent to the consumer and, if appropriate, to the relevant government or state regulatory department, revealing the results of its investigation and, when necessary, any corrective action taken.
If any discrimination is discovered, Ross Mortgage will determine the cause and take appropriate corrective action. This action may include but is not limited to, the following:
• Offering to extend credit to the ap plicant , if they were improperly denied or whose applications may have been inappropriately processed.
• Correcting any institutional policies or procedures that may have contributed to the discrimination.
• Identifying, and then training and/or disciplining, the employees involved.
• Improving oversight systems to ensure that there is no recurrence of the discrimination.