Loan Officer Federal Laws: ECOA Questions and Answers — Questions and Answers
Question 1: Under the Equal Credit Opportunity Act (ECOA), a creditor must provide a copy of the appraisal report used for a loan secured by a dwelling. When must the creditor provide this copy to the applicant?
- Within 30 days of the loan closing.
- Upon the applicant's written request, after the loan has been funded.
- Promptly upon completion, or no later than three business days before consummation. (Correct answer)
- Only if the loan application is denied.
Correct answer: Promptly upon completion, or no later than three business days before consummation.
Regulation B, which implements ECOA, requires creditors to provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit to be secured by a first lien on a dwelling. This must be done promptly upon completion of the valuation or three business days before consummation of the transaction, whichever is earlier.
Question 2: A loan applicant is denied credit. According to ECOA, how long does the creditor have to notify the applicant of the adverse action taken?
- Within 15 days of receiving the completed application.
- Within 60 days of taking adverse action.
- Within 90 days if a counteroffer was made and not accepted.
- Within 30 days of receiving a completed application. (Correct answer)
Correct answer: Within 30 days of receiving a completed application.
ECOA requires creditors to notify an applicant of any adverse action within 30 days after receiving a completed credit application. The notification must be in writing and contain specific information, including the principal reasons for the denial.
Question 3: Which of the following is NOT a protected class under the Equal Credit Opportunity Act?
- Receipt of public assistance income
- Marital status
- Immigration status (Correct answer)
- Age
Correct answer: Immigration status
ECOA prohibits discrimination based on race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to contract), receipt of public assistance income, or the good faith exercise of any right under the Consumer Credit Protection Act. While national origin is a protected class, a creditor may consider an applicant's immigration status to determine their residency and the creditor's rights regarding repayment.
Question 4: A loan officer is taking an application for a mortgage. Under what circumstances is it permissible to ask about the applicant's marital status?
- Only if the applicant is female.
- It is never permissible to ask about marital status.
- If the loan will be secured by the property being purchased. (Correct answer)
- To determine if the applicant is likely to have children.
Correct answer: If the loan will be secured by the property being purchased.
Under ECOA, a creditor may ask about an applicant's marital status (using only the terms married, unmarried, or separated) if the application is for secured credit. This is necessary to determine the creditor's rights and remedies regarding the collateral. It is also permissible if the applicant resides in a community property state.
Question 5: A mortgage lender receives a loan application on March 1st. On March 10th, the lender issues a denial. For how long must the lender retain the application and any related documentation according to ECOA?
- 12 months
- 36 months
- 5 years
- 25 months (Correct answer)
Correct answer: 25 months
Regulation B requires creditors to retain records related to a credit application for 25 months after notifying the applicant of the action taken. This includes the application itself and any information used in the evaluation process.
Question 6: A lender makes a statement to a potential applicant that they "tend to avoid making loans in that part of town because of the high number of renters." Which specific provision of ECOA would this statement most likely violate?
- The requirement for an Adverse Action Notice.
- The rules on providing appraisal copies.
- The prohibition against discriminatory discouragement. (Correct answer)
- The limitations on requesting information about a spouse.
Correct answer: The prohibition against discriminatory discouragement.
ECOA prohibits any oral or written statement that would discourage a reasonable person from making or pursuing an application on a prohibited basis. Linking lending aversion to a neighborhood's characteristics can be a form of discouragement, potentially related to the racial or ethnic composition of that area (a prohibited basis).
Loan Officer Federal Laws: ECOA Questions and Answers
Under the Equal Credit Opportunity Act (ECOA), a creditor must provide a copy of the appraisal report used for a loan secured by a dwelling.
When must the creditor provide this copy to the applicant?