MCP Help Blog

You know the ones–what’s your ethnicity? How many years of schooling do you have? Are you involved in a lawsuit? How old are you? What’s your marital status? Why can’t lenders mind their own business? Aren’t there laws about discrimination? Yes, some of these routine questions on every loan application (often referred to as a Fannie Mae 1003) seem nosy, rude, and pointless. But there’s a good reason for most of them.

Why Should My Lender Care if I’m Involved in a Lawsuit? 
Because if you are the defendant, there’s a chance you could lose. That won’t disqualify you from getting a loan; it will trigger a request for more information–for example a letter from your attorney or some official court documents. There is a difference between a suit that could result in you paying someone $1,000 a month out of your own pocket for life and a $5,000 claim that your insurance will take care of.

Can My Lender Legally Ask What Race I Am?
Yes, and it’s not for the reason you think. Data from every loan application is analyzed by the government and it’s actually to protect minorities. If a certain lender seems to be charging minoritiy borrowers higher rates, declining their applications more often than white applicants, or treating them differently in any discernable way, it does trigger Fair Housing inquiries or even investigations. For example, agents may walk into a lender’s office and see how diffferent races are treated–from who gets offered a cup of coffee and a handshake to who gets the fastest approval and the lowest rate.  You don’t have to answer the question. The form states, “If you do ot wish to furnish the above information, please check the box below.But then your loan officer will have to make a reasonable effort to guess and complete the form anyway. The form also states the following: “if you choose not to furnish it, under Federal regulations this Lender is required to note race and sex on the basis of visual observation or surname.”  The intention behind gathering that information is in fact to protect borrowers, not make discrimination easier for lenders. Besides, discrimination is a stupid business practice when it’s so easy for people of all races to compare mortgage rates online while divulging almost no personal information.

Marital Status? Why?
States have different laws pertaining to the division of property interest between married couples. For example, in a community property state, it is assumed that property purchased by one partner is also legally the property of the other–unless the other partner okays the deal by signing off with a “quit claim” and allowing the other to take possession as his or her own separate property. So a lender needs to know your status to make sure that title is taken correctly and the correct forms comepleted. In addition, legal separations or divorces trigger additional requests for information, such as child support agreements and property division that may affect your ability to pay your mortgage.

Age? Education? C’mon, That’s Crazy!
Not necessarily. Of course you can’t discriminate against a 90-year-old guy who wants a 30 year mortgage. That’s good. But you do need to know that the buyer is old enough to legally execute a real estate contract. In most states that age is 18. Other lenders use it as a check for fraud–your age should match your credit report, for one thing.

And education? Nope, they really aren’t more likely to give you a loan if you have a college degree than if you don’t if everything else is okay. Where it can help is with certain programs, FHA for one, that will lend more if you have what they call “mitigating circumstances.” So for example the fact that you just got out of medical school will somewhat mitigate the fact that you haven’t been employed long or that you aren’t real high up the income food chain yet. So, answering the question about education won’t hurt you and it could help you. Note: for those who haven’t got the fancy degree, there are other mitigating circumstances for you too–like the fact that you were smart enough NOT to accept all those credit cards they hand out to college students like candy and that you demonstrated that you were smart enough to avoid excessive debt!). 

So, yes, a lot of the mortgage loan process seeems silly. And in fact, a lot of it IS silly. But often there is a method to the madness and most of the time it is designed to work in your favor.