When we think of fair housing, we often picture rental apartments or home sales. But fair housing laws also extend to mortgage lending – an area that can be rife with less-obvious discrimination. As a real estate agent, you’re not a lender, but you play a crucial role in your clients’ home buying journey, including the financing process.
Your clients trust you to guide them, and that means helping them navigate the mortgage world without falling victim to biased practices. In this post, we’ll discuss how to recognize red flags in mortgage lending, what lending discrimination looks like today, and how you can empower and advocate for clients if they face unfair treatment.
Think of it as another facet of your job that goes beyond showing homes – one that’s increasingly important for ethical and successful real estate practice.
Fair Lending 101: The Basics Every Agent Should Know
First, let’s clarify what laws are at play. The Fair Housing Act makes it illegal to discriminate in any aspect of housing, including the “terms and conditions” of home loans.
This means lenders cannot, on the basis of protected characteristics (race, color, religion, sex, disability, familial status, national origin), do things like refuse to make a mortgage, offer different interest rates or fees, or provide unequal information to some borrowers.
In parallel, the Equal Credit Opportunity Act (ECOA) is a federal law that specifically prohibits credit discrimination on bases like race, sex, marital status, age, etc., for any type of credit – including mortgages. ECOA is enforced by the CFPB and FTC and requires lenders to give reasons if they deny credit. Together, these laws aim to ensure that if a person qualifies financially for a loan, they should be able to get it without bias or barriers due to who they are.
Despite these long-standing laws, lending discrimination still occurs, sometimes in subtle ways. Historically, practices like redlining (denying loans or insurance in certain neighborhoods based on racial makeup) were blatant and systemic.
Today, outright redlining is illegal, but there are modern equivalents – like “disparate impact” discrimination where neutral policies disproportionately harm a group, or predatory lending targeted at vulnerable communities (for example, steering minorities into higher-cost loans even when they qualify for better). As an agent, you don’t underwrite loans, but you might observe patterns or hear things from clients and loan officers that hint at these issues.
Red Flags in Mortgage Lending Practices
How can you tell if a lender might be treating your client unfairly? Here are some red flags of possible lending discrimination:
- Different Loan Terms for Similar Profiles: If you notice a client with good credit and income (say, Client A) is being offered noticeably worse loan terms than another client (Client B) with a similar financial profile – and the only difference is a protected characteristic like race or family status – that’s a huge warning sign. For example, if Client A (a single mother) gets quoted a higher interest rate or extra fees than Client B (a married man) for the same loan product and credit score, something’s off. Lenders can offer different terms based on credit risk (that’s normal), but not based on personal traits. As HUD explicitly notes, it’s illegal to impose different interest rates, points, or fees based on protected factors.
- Discouraging a Client from Applying: Pay attention to the tone and content of lenders’ communications. If a loan officer says to your client, “Are you sure you want to apply? People like you might have a hard time getting approved,” or “Maybe you should consider a cheaper house,” without a legitimate financial basis, it’s a red flag. Lenders should welcome applications and assess them fairly. Discouragement can be a tactic to ward off certain borrowers. A reputable lender will encourage all qualified borrowers to apply, not selectively turn some away. No one should be told not to bother applying because of who they are (whether that’s said outright or implied).
- Excessive Scrutiny or Different Requirements: If one client is asked to provide far more documentation or jump through more hoops than is typical – for instance, requiring a higher down payment from a minority borrower than they require from others, or insisting on a co-signer when others with similar finances don’t need one – that could signal bias. The process should be consistent. (Of course, every loan application is unique, but big discrepancies raise questions).
- Unequal Communication or Information: Perhaps you refer two clients to the same bank. One client (let’s say, who has an ethnic-sounding last name) complains that the loan officer was unresponsive or didn’t offer them certain products, whereas the other client (with a majority-sounding name) had a smooth experience and was offered various options. If you catch wind that the lender “never called back” certain clients or always seems to push one demographic toward FHA loans with higher fees, take note. Refusing to provide information about loans to certain applicants is explicitly listed as discriminatory.
- Comments or Coded Language: Occasionally, a loan officer might drop a comment that reveals bias – maybe something like, “Those people often have trouble with credit,” or “That neighborhood isn’t great for resale, are you sure they want to buy there?” If those comments relate to protected classes or minority neighborhoods, they’re highly inappropriate. Sometimes the bias isn’t even conscious – a loan officer might make assumptions about someone’s financial literacy or family support based on race or background. Such assumptions can lead to unequal assistance in navigating the loan process.
As agents, we often have a bird’s-eye view. We might work with many different clients and lenders, so patterns become visible to us that an individual borrower might not notice.
For instance, you might realize that a particular lender has denied all your single female buyers this year while approving all the married couples – if everything else was comparable, that pattern stinks. Or you hear from several immigrant clients that Lender X quoted them very high rates. Trust those spidey senses when something doesn’t add up.
One real-world example: In recent years, investigations have uncovered that even home appraisals can be biased. There have been cases where Black homeowners received shockingly low appraisals until they removed family photos and had a white friend stand in – and then the value jumped up.
In one complaint resolved by HUD, an African-American woman alleged her home was undervalued because of her race, leading the bank to offer a lower refinance amount. The case resulted in a settlement; the bank had to pay $50,000 and institute training on appraisal practices fairhousingnc.org.
For agents, appraisal issues might surface when a sale’s valuation comes in far below expected market value without good reason. While appraisers are independent, if there’s reason to suspect bias, you can support your client in asking for a reconsideration or second appraisal.
How to Advocate for Clients Facing Lending Bias
So what can you do if you suspect a client is hitting a wall due to discrimination in lending? While you can’t (and shouldn’t) perform a lender’s job or strong-arm their underwriting, you can take supportive actions:
- Encourage Shopping Around: This is the number one piece of advice. If one lender gives an oddly negative or poor experience, urge your client to talk to a couple of other lenders. Sometimes bias at one institution can be bypassed by simply finding a different, more equitable lender. Plus, comparing loan offers is just smart consumer behavior. Frame it to your client that it’s about getting the best terms – and quietly, you’ll also be helping them see if that first lender was an outlier. For example, if Lender A denied them with a vague explanation, but Lender B (with similar criteria) pre-approves them, that’s a sign something was off. By having multiple quotes, your client is empowered and not at the mercy of one institution’s practices.
- Document and Inquire: If a loan application is denied or comes back with unfavorable terms, advise your client to get the reasons in writing. Under ECOA, a borrower who is denied credit is entitled to a written statement of specific reasons (or instructions to request one) within 30 days. Generic reasons like “credit score” or “income” should align with actual facts. If the reason given doesn’t make sense (e.g., “insufficient income” when you know their income was well above the requirement), something might be wrong. Sometimes it’s a mistake or misunderstanding – other times it could be cover for bias. Documentation is key if the client later needs to file a complaint. As an agent, you can help the client understand the denial letter or even communicate with the mortgage broker to clarify any confusion.
- Recommend Fair Housing Resources: Let your client know that they have recourse. For instance, if they truly suspect discrimination, they can file a complaint with HUD’s Office of Fair Housing and Equal Opportunity (FHEO) or with the Consumer Financial Protection Bureau. HUD will investigate allegations like “I believe I was denied a loan because of my race” under the Fair Housing Act. The CFPB oversees fair lending compliance broadly and can take complaints about discriminatory lending practices as well. You might say, “I’m not an attorney, but there are organizations that take this very seriously, and you have the right to speak up.” Sometimes just mentioning these avenues can also empower the client to confront the lender informally (e.g., “I might have to contact HUD about this”) which could prompt a second look by the bank.
- Be Willing to Speak Up (Professionally): If you have a relationship with a lender and suspect something improper, a diplomatic conversation can sometimes help. For example, if a preferred lender partner denied a qualified client, you might call your contact and say, “I wanted to check in and see if there was anything we can do to help [Client]. We were surprised they didn’t qualify – their credit and income seemed solid. Is there an issue we don’t know about?” You’re giving the lender a chance to explain a legitimate reason. If they hem and haw or give an unconvincing answer, you might gently remind them, “You know we’re committed to fair housing. I just want to make sure nothing inadvertently unfair is happening. They felt a bit discouraged after meeting with your team.” This is a soft approach, but it signals that you’re watching. Good lenders will appreciate the feedback and maybe realize they need to communicate better; bad actors will realize you’re not a silent bystander. Of course, use tact – accusing a lender of discrimination outright will put them on the defensive. But advocating for your client’s file to get a thorough, unbiased look is within bounds.
- Educate Clients on Their Rights: Many buyers have no idea about fair lending laws. They might internalize the rejection and think “I guess I just can’t buy a home” when in fact it wasn’t their finances at fault. By informing them, “Hey, just so you know, lenders aren’t allowed to base decisions on things like the fact that you’re on maternity leave or that you’re from X country. If you feel that played a role, we should explore it,” you turn a disempowering situation into an actionable one. Even something like being on maternity leave – believe it or not, there have been cases of lenders delaying or denying mortgages because the borrower was expecting a child, under the assumption she wouldn’t return to work. HUD has pursued and settled cases on that basis (familial status discrimination in lending). Your knowledge can reassure a client that the law is on their side.
- Steer Clients to HUD-Approved Housing Counselors or Nonprofits: There are HUD-approved housing counseling agencies and fair housing organizations (like the National Fair Housing Alliance and its local members) that can directly assist clients who feel discriminated against. As an agent, you might provide a list of local resources. These organizations can sometimes do testings or intervene on the client’s behalf. It’s extra support outside of the transaction that shows you truly care about the client’s wellbeing, not just the sale.
Your Role as an Agent in Fair Lending
While you’re not originating loans, you do often recommend lenders or have preferred partners. Choose those partners carefully. Align yourself with loan officers known for treating clients from all walks of life fairly. Continuing education for real estate agents often touches on fair lending during broader fair housing training, so use that knowledge.
If your brokerage offers training on avoiding mortgage fraud or steering, take it. The more you know about how lending works, the more easily you’ll spot irregularities.
Also, reflect on your own practices. Are you inadvertently contributing to unequal access? For example, if you only ever suggest one financing route or push all FHA buyers to a certain bank, consider whether you’re truly giving each client the best array of choices.
Maybe broaden your network of lenders so you can serve different needs (first-time buyers, self-employed borrowers, etc.) without bias. And be cautious of any tendency to “prejudge” a client’s financial capabilities – sometimes agents might assume a client won’t qualify and inadvertently discourage them upfront (“This house might be out of budget for you, maybe try a cheaper one”).
Leave the credit decisions to lenders; your job is to facilitate and encourage, not gatekeep who can attempt a purchase. Implicit bias can affect anyone, and just as we guard against it when showing houses, we should in the financing step too.
The Power of Knowledge and Continuing Education
Staying informed about fair lending issues is part of being a great agent. In 2023 and beyond, we’re seeing renewed emphasis on equitable homeownership. Major organizations are pushing initiatives to close the racial homeownership gap, and uncovering lending biases is part of that effort.
For instance, studies have shown minority borrowers on average still get higher interest rates or fewer approvals than white borrowers with comparable profiles – indicating that our work in this arena isn’t done. By keeping up with these trends (through news, seminars, or real estate CE courses focused on fair housing), you’ll be better prepared to help your clients.
Many agents find that fair housing training they initially took just to get their license or renew it turned out to be very relevant later on. If it’s been a while since you delved into topics like ECOA, redlining, or how to handle potential discrimination, maybe it’s time for a quick refresher.
Even an online real estate CE module on fair lending can provide updated guidance – for example, how algorithmic credit scoring might unintentionally disadvantage certain groups and what regulators are doing about it. It’s actually pretty interesting stuff when you get into it!
Be Your Client’s Advocate
At the end of the day, helping clients buy a home isn’t just about finding the right property – it’s about making sure they have a fair shot at keeping that property through a good loan. By being vigilant for lending discrimination and ready to act, you add immense value to your role.
Clients may not even realize you saved them from a bad situation, but they will appreciate the outcomes: better loan terms, a successful closing, and the sense that someone had their back throughout the process.
Maintain that friendly, helpful demeanor but back it up with knowledge. If a client hits a snag with financing that smells like bias, you can say, “I’ve seen this before, and there are things we can do. You have rights here.”
This kind of support is part of the holistic service great agents provide. It’s not about being adversarial with lenders – many lenders are wonderful partners – it’s about not leaving your client to fend for themselves if something unfair occurs.
By championing fair lending, you’re also doing your part to chip away at broader inequality in homeownership. Every family you help who might otherwise have been sidelined is a win for fair housing.
So keep this knowledge in your toolkit. And as a gentle nudge, remember that real estate continuing education isn’t just a checkbox for license renewal – it’s an opportunity to sharpen these advocacy skills. Courses on fair housing or ethical lending practices can give you case studies and expert insights that translate directly to better client service.
Protecting your clients means protecting their ability to finance their dream home without discrimination. With your guidance, they’ll not only find the right house, but also the right keys to unlock its door – on fair and equal terms.
To Learn More...
For real estate professionals, understanding these concepts can be particularly valuable during discussions with clients about why REALTORS® and real estate agents are knowledgable professionals.
If you’re preparing for your Real Estate Continuing Education or looking to enhance your knowledge through a Real Estate Course, topics like fair housing and confronting racial discrimination can help set you apart.
As part of your License Renewal Course or other Real Estate CE efforts, staying informed on foundational property concepts can make a big difference in your expertise and client relationships.