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The Consumer Financial Protection Bureau (CFPB) recently issued a bulletin to help mortgage lenders evade illegal discrimination against applicants that include vouchers from the Section 8 Housing Choice Voucher (HCV) Homeownership Program in their income when applying for a mortgage loan. This type of discrimination may violate federal fair lending protections.
The bulletin offers lenders advice for observing their fair lending risks' including the importance of clear underwriting policies, training for underwriters and loan originators, and careful monitoring for compliance with underwriting policies.
“Everyone deserves the opportunity to qualify for a mortgage that they can afford, based on their stable income,” CFPB Director Richard Cordray said. “Consumers should not be put at a disadvantage just because they receive public assistance.”
According to the bulletin, the Section 8 HCV Homeownership Program was enacted in an effort to assist low-income families in purchasing their first home. HUD funds the programs and local public housing authorities administers the vouchers to those they deem in need. Public housing authorities provide eligible applicants with a monthly housing stipend that is intended to ease the burden of housing payments.
It has been brought to the CFPB’s attention that mortgage lenders have refused income that comes from this program when considering applications for loans and underwriting processes, as noted in the bulletin. Some institutions are only accepting the vouchers for certain mortgage loan products or delivery channels.
The Equal Credit Opportunity Act (ECOA) does not allow creditors to discriminate against an applicant because some or all of the applicant’s income is from a public assistance program, such as the Section 8 HCV Homeownership Program. If lenders exclude or refuse these vouchers as an income source categorically, or accept the vouchers for specific types of loans, they may violate ECOA and its implementing regulation, Regulation B.
Today, HUD Secretary Julián Castro addressed the importance of the HCV Homeownership program during a national press call to address House Republican cuts to investments in urban communities.
In February, President Obama developed a budget proposal that would benefit Americans who are in need housing assistance. A Republican-controlled house responded to the President’s proposal with “a budget that supports inaction and disinvestment when it comes to the needs of our nation’s most vulnerable citizens,” Castro, said on the call.
When announcing the call HUD referenced a Harvard University study that found that mobility and place-based policies create pathways out of poverty. HUD initiatives such as Choice Neighborhoods and HCV are two such place-based policies.
“Without these vouchers, HUD will not be able to continue assistance to many low income households, or provide new vouchers for families, veterans, and tribal families experiencing homelessness; victims of domestic or dating violence; youth aging out of foster care; and families with children in the foster care system for whom voucher assistance could facilitate reunification,” Castro said.
To read the full bulletin visit: Files.ConsumerFinance.gov
