Mortgage Lending for LGBTQ+ People

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Mortgage Lending for LGBTQ+ People

LGBTQ+ people have long suffered discrimination in housing, employment, and access to places that the law refers to as “public accommodations,” such as restaurants and hotels. While a 2013 Pew Research Center study of individuals who identify as lesbian, homosexual, bisexual, or transgender found that society has been more tolerant over the preceding 10 years, the law has tended to lag behind. Among the best examples are the regulations governing mortgage lending.

In order to eliminate prejudice, new legislation or modifications to existing laws now include “sexual orientation and gender identity.” The following two words provide safeguards that cover a wide spectrum of LGBTQ+ community members: Transgender refers to a person’s gender identification, while lesbian, gay, and bisexual relate to a person’s sexual orientation. The plus symbol designates persons with sexual orientations or gender identities other than LGBTQ, while Q designates those who identify as either “queer” or “questioning.”

Key Takeaways

  • The discrimination against LGBTQ+ individuals in mortgage loans is not expressly prohibited under the Fair Housing Act or the Equal Credit Opportunity Act.
  • Federal organizations have started to apply the LGBTQ+ community to such laws, nevertheless.
  • With the passage of the federal Equality Act, it would be illegal to discriminate against LGBTQ+ people in employment, housing, and other sectors.
  • Some state and municipal governments have their own legislation to prevent discrimination against LGBTQ+ individuals.

Mortgage Lending Bias: The Evidence

According to a 2019 research by Hua Sun and Lei Gao of Iowa State University, same-sex couples were 73% more likely to have their mortgage application denied than equally eligible different-sex couples between 1990 and 2015. Additionally, same-sex couples that received mortgage approval paid, on average, 0.02% to 0.2% more in interest and fees.

The difference in approval rates, according to the researchers, had nothing to do with same-sex couples being less creditworthy. According to their analysis, same-sex borrowers are less hazardous overall since they have a comparable default risk but a lower prepayment risk. Despite being less hazardous borrowers, same-sex couples were nevertheless more likely to have their mortgage applications denied.

Another 2019 research examined the impact of race and sexual orientation on the acceptance rates of more than 5 million Federal Housing Administration (FHA) mortgage applications. This study was conducted by J. Shahar Dillbary and Griffin Edwards of the University of Alabama. No of their color, same-sex male couples were shown to have lower mortgage approval rates than White heterosexual couples, with Black male couples having the worst rejection rates. However, lesbian couples performed better. Their approval ratings were either statistically identical to White heterosexual couples’ approval rates or significantly higher for them.

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It is more challenging for LGBTQ+ persons to find affordable and secure housing because of the challenges they encounter while applying for a mortgage. According to a 2020 survey by the Williams Institute at the UCLA School of Law, just 49.8% of LGBT persons had their own residences, compared to 70.1% of non-LGBT adults. The organization discovered that house ownership is “much lower among LGBT ethnic minorities and transgender persons” in earlier research.

Additionally, a lot of LGBTQ+ individuals look for housing in welcoming areas of the nation as well as employment with LGBTQ+-friendly businesses. Living in cities where housing expenses, including mortgage payments, may be much higher than the national average is a common result of this.

Federal Initiatives to Ensure LGBTQ+ Rights

Americans are protected against discrimination on the basis of race, color, national origin, religion, sex, family status, and handicap according to the Fair Housing Act, which was established in 1968 and revised in 1988. However, neither gender identity nor sexual orientation are mentioned in detail. The Fair and Equal Housing Act, a law that was presented in 2019, will include “sexual orientation” and “gender identity” on the list.

According to Dillbary and Edwards’ research, such absence in federal housing law has shielded additional discriminatory lending practices. In addition to being legal, blatant sexual orientation discrimination may also be utilized by lenders as a “defense,” the authors note. “For instance, a lender that discriminated against a black applicant might avoid accountability if it can be shown that the applicant’s sexual orientation, rather than his race—a protected trait that gives rise to liability—was the reason for the discrimination.”

On the federal level, a change might be on the horizon. President Biden signed an executive order “Preventing and Combating Discrimination on the Basis of Gender Identity or Sexual Orientation” on his first day in office. People “should be allowed to…secure a roof over their heads without being exposed to sex discrimination,” according to the presidential order, which directs agency heads to assess and amend their policies in conformity with that purpose.

The Equal Credit Opportunity Act of 1974 forbade lending discrimination based on race, color, religion, national origin, sex, marital status, age, or the receipt of public assistance, similar to the Fair Housing Act, but it left out any mention of sexual orientation or gender identity. However, the Consumer Financial Protection Bureau (CFPB) said on March 9, 2021 that it will interpret the act’s ban on discrimination based on sex to encompass discrimination based on sexual orientation and gender identity.

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Acting CFPB director David Uejio said in the statement that “we are making it clear that lenders cannot discriminate based on sexual orientation or gender identity by adopting this interpretative rule.” “The CFPB will make sure customers are protected from such discrimination and given equal chances in credit,” it says.

Additionally, the CFPB said that it was eager to “engage with Congress on the Equality Act, which, if passed, would codify safeguards for consumers against discrimination based on sexual orientation and gender identity in all financial goods and services.” The Equality Act would outlaw discrimination based on sex, sexual orientation, and gender identity in housing, credit, employment, education, and other sectors. It was approved by the House on February 25, 2021, and the Senate is now considering it.

Initiatives on the State and Local Level

23 states and the District of Columbia have laws prohibiting housing discrimination based on sexual orientation, and all but one of them also prohibit discrimination based on gender identity or expression, according to the Movement Advancement Project, a nonprofit research group.

Although some of the states with the highest population on that list—including California, Illinois, and New York—are LGBTQ-friendly, the advocacy group GLAAD maintains that “these laws only cover approximately 49% of the American LGBTQ population, leaving an unacceptable majority of LGBTQ people vulnerable to lawful discrimination.”

According to the Movement Advancement Project, at least 330 towns also “completely and explicitly ban discrimination against LGBTQ individuals in employment, housing, and public facilities.”

For instance, there are ordinances prohibiting discrimination based on sexual orientation in 12 counties (out of 67), 28 cities, and four other municipalities in Florida, which lacks a statewide anti-discrimination law. There are also ordinances prohibiting discrimination based on gender identity in 12 counties, 26 cities, and five other municipalities. As a consequence, according to the group, these rules apply to 60% of the state’s residents. However, in some other states, that proportion is as low as 0%.

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The Movement Advancement Project observes that, at best, “local ordinances, state statutes, federal court judgements, and more form a patchwork of nondiscrimination protections for LGBTQ persons around the country.”

Where to Get Help If You Need It

Many governmental and non-governmental groups receive complaints and take action on behalf of LGBTQ+ persons who think they have been subjected to discrimination in contravention of the law. These consist of:

Office of Housing and Urban Development, United States (HUD).While the Fair Housing Act does not specifically prohibit discrimination on the basis of sexual orientation or gender identity, the HUD, which is responsible for enforcing the legislation, now encourages LGBTQ+ individuals to report incidents of discrimination by filing a complaint. According to the organization, “HUD will accept and examine any legally valid sex discrimination complaints, including discrimination based on real or perceived gender identity or sexual orientation.”

Bureau of Consumer Financial Protection (CFPB).Based on the Equal Credit Opportunity Act, the CFPB handles discrimination complaints against lenders and mortgage brokers (ECOA).The Fair Housing Act and this law both do not specifically mention discrimination against LGBTQ+ people, but according to the CFPB website, “the law supports arguments that the prohibition against sex discrimination also affords broad protection from discrimination based on an applicant’s sexual orientation and gender identity.”

Union for American Civil Liberties (ACLU).For reporting discrimination relating to LGBTQ+ and HIV, the ACLU maintains a dedicated web form. The group claims, “We’ll let you know whether we can help you with legal matters. If we can’t, we’ll look for another group that may be able to assist more effectively.

Law firm Lambda. This non-profit LGBTQ+ civil rights group maintains an online help desk that offers tools and information on housing and other forms of discrimination but does not give individualized legal counsel.

Your state or local housing agency, a local legal aid group, or a private attorney with experience in discrimination cases may be able to help in addition to those national options.

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