Gay Discrimination in the Mortgage Industry

Fifteen years ago, Renee Spears’ mother and her partner entered their local bank to refinance their home. After filling out the paperwork, the couple found that it was bank policy not to offer home loans to gay applicants. The bank requested that the couple close their accounts and go to another bank.

“My mom and her partner were extremely upset and too embarrassed to go to another bank and face this rejection again,” Spears said.

Thankfully Spears was a loan officer at the time and assisted with their mortgage at the bank she was currently working at. Other referrals began to pour in for Spears. She decided to start a business on this model and help a part of the population that was being ignored.

Spears, the founder of Portland, Ore.-based Rose City Mortgage, now helps facilitate mortgage loans with an open-minded and anti-discriminatory business model.

Although some lenders might not care about the borrower’s sexual identity or preference, the United States is still an unequal country for the LGBT (Lesbian, Gay, Bisexual, and Transgender) community.

Overturning DOMA

Last month, the Supreme Court heard oral arguments both for and against the constitutionality of the Defense of Marriage Act (DOMA). If DOMA is ruled unconstitutional, barriers that same-sex couples face in healthcare, insurance, and other areas would be broken down.

Beyond these visible barriers lies a less known barrier for homosexual couples: housing.

Along with Washington, D.C., only nine U.S. states allow gay marriage. Since the country has not legalized gay marriage, there is room for more discrimination, especially when applying for a mortgage loan to finance a new home. Without federal approval of marriage, clear definitions about what a couple is are disputed. Homosexual partners are not afforded the same federal protections as their heterosexual counterparts, which opens the doors to discrimination in the housing industry.

But organizations are fighting back.

The Application Process

Jake Planton, a loan officer for Rose City Mortgage, said when he started in the lending business seven years ago, all lenders required couples to fill out separate applications and provide separate credit reports — “no matter what.”

But over the years, lenders began permitting legally married couples to jointly file applications. Joint applications allow prospective homebuyers to group their assets and credit scores, enabling them to qualify for a better house or interest rate.

Planton said that now, if same sex couples are domestically partnered and have shared credit or assets, they can use the same mortgage application.

Exceptions do exist.

“There are a few lenders that still require they separate them, but we have stopped using those lenders,” he said.

However, today’s application process has become simplified, according to Bill Parker, loan officer with GenCor Mortgage. This simplified process lessens the severity in the different between joint and separate applications.

Planton agrees that the process is simplified. He said unmarried couples, heterosexual or homosexual, must simply file a few extra forms when applying for a mortgage together.

But states should realize that to include some of the population, while excluding a large part of that population is an overall hindrance on business.

Free Market Economics

According to the U.S. Census Bureau, the percentage growth of same-sex couple households grew over 80 percent from 2000 to 2010. Homosexual couples are a powerful force in the economy, and some respondents state that their impact can and should not be ignored.

Parker’s processing manager, who asked to remain nameless, questioned why homosexual applicants would be discriminated against. He said underwriters are given guidelines by Fannie Mae, Freddie Mac, the FHA, and other authoritative organization, and the last thing lenders would want to do it have to buy the loan back because they treated someone differently.

He said, in his experience, it seems that same sex couples are often better qualified and more diligent about their credit history.

Ronny Jetmore, principal of Jetmore Insurance Group, said this form of discrimination is ridiculous because the free market wants to make money.

“If a company wants to make money on you, you let them compete for the business, and if not, just don’t use them,” Jetmore said. “Companies want to make money, and if they don’t want your money because they don’t like you, just go somewhere else.”

Although it is seemingly against logical business models to discriminate, it still occurs. Parker knows this, but he still doesn’t understand why.

“Our business is to do loans and make money. Who cares who the borrower is,” he questioned.

Recent Settlement

In early January 2013, Bank of America settled an LGBT discrimination claim stating that the lender refused to finance a lesbian couple. The U.S. Department of Housing and Urban Development (HUD) claimed that the couple was denied a mortgage loan because of their sexual orientation and marital status. The applicant listed her partner’s mother as a co-applicant on the loan. Bank of America did not accept that the mother was a direct relative because the two women were not married, and denied the couple’s mortgage loan. 

Bank of America agreed to pay a $7,500 settlement to HUD.

Ken Carroll, Director of the Fair Housing Assistance Program in HUD’s office of Fair Housing and Equality Opportunity, said Bank of America took up actions after the settlement. The bank decided to notify all current and future employees that discrimination will not be accepted. 

The settlement was the first implementation of HUD’s new Equal Access Rule which went into effect on March 5, 2012. The Rule ensures that any housing providers that receive HUD funds must provide equal access and prohibits lenders from basing mortgage loan eligibility on “actual or perceived sexual orientation, gender identity or marital status.”

“The impact is really to ensure that otherwise eligible lesbian, gay, bisexual and transgender individuals have equal access to HUD-funded and HUD-insured programs,” Carroll said.

Although the rule impacts HUD housing, it does not transfer to housing rights on a federal level.

The Fair Housing Act, a part of the Civil Rights Act of 1968, prohibits discrimination in the sale, rental, financing of housing-related transactions based on race, color, nationality, religion, sex, family status or disability. The Act has no ruling for sexual orientation or gender identity.

Due to this lack of federal laws, discrimination cases slip through the cracks.

One Issue Among Many

Janson Wu, staff attorney at Gay & Lesbian Advocates & Defenders (GLAD) said there are so many issues facing the community, and housing is an important one. He said the lack of housing for LGBT youth is shocking. Homeless LGBT youth represent upwards of 40 percent of the homeless population living on the street and in shelters.

In states that do not have laws against sexual orientation and gender identity discrimination, residents can face evictions or be fired from their job because they are LGBT.

Currently only 16 U.S. states and Washington D.C., protect against discrimination due to sexual orientation and gender identity. Five additional states only protect against sexual orientation discrimination.

As a part of the Equal Access Rule, HUD is protecting the LGBT community in homeless shelters. Carroll said that agency requires HUD-supported shelters to accept all people. He said residents are not allowed to be denied access due to their sexual orientation or their gender identity. This is important, for example, if a transgender woman wants to stay at a shelter for women, but is denied access because she was born a man. This discrimination will not be accepted any longer.  

The rule will allow individuals to access shelters where they feel the “safest and the most comfortable,” Carroll said.

Although Wu believes the current laws are inadequate for housing and anti-discrimination, he said the Equal Access Rule and the BOA settlement are positive progressions.

He said the actions “gives clear notice what is, and what is not, OK under the law.”