Federal Discrimination Laws
The following are the Federal Laws that regulate the actions of businesses and institutions regarding discrimination in the leasing and financing of residence housing in America.
Constitutional Amendments - The founding fathers never wrote discrimination laws into the Constitution of the United States. Therefore, after the Civil War, America wrote a number of amendments to the Constitution to deal with slavery. These amendments dealt with human rights, which today we refer to as discrimination.
13th Amendment (1865) - This was the amendment to the constitution that abolished slavery. This was the first step toward civil rights. Those who devised this amendment felt that this made all people equal in America. Unfortunately, the South did not see it that way and additional work had to be done.
14th Amendment (1868) - This amendment gave all the former slaves' full citizens' rights under the Constitution. If the individuals who wrote the 13th Amendment had done a proper job, the 14th Amendment wouldn't have been necessary.
Civil Rights Act Of 1866
This Act was passed right after the Civil War and was designed to protect the African-Americans. It has worked to the betterment of all minority groups that have been in America as well. Its effects are as follows:
Civil Rights Act Of 1968
This is the landmark discrimination law that we live with today in our every day life. Prior to this Act, the Federal Government could not take action against any wrongdoer other than cut off funding for a project. Prior to this Act the only means of action a person had, if they experienced discrimination, was to sue.
The Civil Rights Act of 1968 is also known as the Federal Discrimination Law, Open Housing Law, or Federal Fair Housing Law. It established the following:
Example: All applicants to The Bar, CPA, CRI, CLU, etc. must be equal.Regarding real estate professionals, there is only one organization called the National Association of Realtors. All applications for membership are equal.
1988 Fair Housing Amendments Act
In 1988, the Federal Government added additional classes to the list of protected groups. This Act added Handicapped Individuals and the Family Status to the discriminatory law.
Implementing - The application of the Act for the two protected classes include the following:
Example: No pets. If the handicapped need a seeing eye dog, the landlord must allow the animal.
Exception: Housing for "seniors" such as a Retirement Home. A facility can discriminate against familial status if all occupants are at least 62 years old or 80% of units have 55-year-old occupants and the facility is designed specifically for the elderly regarding building facilities as well as the specific units themselves.
Americans with Disabilities Act
This was the first Act that was designed specifically to protect all people with disabilities. It was signed into law on July 26, 1990.
To improve environmental accessibility for the expanding population that is elderly and/or disabled. It is designed to improve the life style of individuals who suffer a disability.
The figures that show the need for this protective class:
Federal Flood Insurance Program
This is an insurance program that is utilized by people who want to live on a flood plain next to a river. The insurance industry knows it is a no brainer and won't provide insurance. So, it is up to the American taxpayer to provide the insurance for these individuals. The program does the following:
The Reason - Mortgage Financing - To obtain a mortgage on a residence in these areas, flood insurance is required by Federally regulated lending institutions. The lenders do not want to be stuck with a loan for an uninsured home.
Hardship For All - Flooding creates personal hardships and economic distress for those who live on the flood plains during the flood season. It requires unforeseen disaster relief measures for those who are "flooded out." In that the government provides disaster relief, it places a burden on the nation's resources.
Past Problem - Past programs and preventative measures designed to reduce losses to floods have been insufficient. Thus the need for insurance.
Encourages Local Effort - Sharing the risk of flood losses is a matter of national policy. It encourages preventative and protective measures on the part of local government. It also encourages sound land use to minimize flood losses.
Local Area Must Qualify - FEMA requires local areas to publish an emergency plan. If FEMA is satisfied with the County plan, it will allow the sale of flood insurance in that area.
Consumer Credit Protection Act
REGULATION Z (Truth-In-Lending Act TILA, or Regulation Z) - This regulation was passed by the Board of Governors of the Federal Reserve System to regulate consumer loans. It is also known as Regulation Z and the Truth-In-Lending Act TILA.
Purpose: Protect the consumer involving real estate financing.
Governing Body: Regulation Z (TILA) was passed by the Federal Reserve System and now is governed by Consumer Financial Protection Bureau
Comparison Shopping - It allows consumers to compare the cost of borrowing on a fair basis. It requires all lenders to utilize the same mathematical formulas in determining interest rates.
Additional Costs. - It requires a lender to show all the costs of borrowing including late fees, adjustment possibilities if it is an ARM, handling fees such as the reserve for taxes and insurance, etc.
Regulates Disclosure - This way the consumer can compare the cost of borrowing between lenders on a fair basis.
All Lenders - The Act applies to all commercial bank creditors and arrangers of credit who regularly extend credit to natural persons including the assumption of loans. Examples of those who regularly extend credit would be:
When Required - Disclosure is mainly when arranging loans presented to the general public for personal needs such as homes, cars, college, furniture, etc. Those Excluded - The Act does not apply to:
As we talked about earlier, the Act requires specific information that has to be on the disclosure statement. The following are required to be disclosed in the required format:
Finance Charge - The Finance Charge must be expressed on an Annual Percentage Rate (APR) basis. This is the same formula that all lenders have to use so that the consumer can easily compare costs between lenders.
Percentage to the Nearest 1/4% - The yearly cost of interest (APR) must be shown in a percentage to the nearest 1/4 of 1%. A lender could not show 9.125 (1/8). The last number that it can show is .25 (1/4 %).
Charges and Fees Shown - The Disclosure Statement must also include any loan charges, discounts in the calculation, possible late fees, etc .
Shown in Dollars and Cents - For each loan, the borrower must be shown the Amount of interest and loan charges in Dollars and Cents. Each individual loan must show the total dollar figure that the borrower will have to pay for the loan period.
Beginning Date - Each loan presentation must show the Date financing charge begins. The Disclosure Statement must show the exact date that interest will begin to be charged on the loan.
The following also have to be disclosed on each loan presentation:
Actual Due Dates - Each presentation must show the payment amount and due dates of payments PLUS any "balloon payment" conditions that are required. The Disclosure Statement must have a page showing each required payment throughout the mortgage period and the decreasing balance with each payment.
Property being Financed - Each loan presentation must have a Description of property being secured. The Disclosure Statement should list the item being purchased on time. With a real estate purchase, the statement would state the address of the property.
Security Device Disclosed - Each presentation must show the Kind of security interest. The disclosure statement must show whether the security interest is a mortgage, trust deed, land contract, etc.
Default Charges and Calculations - The presentation must show any possible default charge Amounts and methods of calculating default, delinquency and late charges. With a real estate security/lien, the calculations of delinquency and/or late fees can be very confusing. The Disclosure Statement must be clear and concise.
Prepayment Penalties - If the loan has prepayment penalties, it must show the Amount or method of calculating prepayment penalties. If a real estate security/lien has a prepayment penalty, it must show the maximum fee that can be charged for prepayment.
The Act grants a borrower a three business day right of rescission on certain loans. This Act allows an individual to think things over before being fully committed to a finance contract. Basically, the 3 business day period begins when the borrower receives the Disclosure Statement. It runs:
The reason for the exemption is the closing date of escrow. With real estate transactions, the effective date is usually a number of days after the loan documents have been signed and Disclosure Statement has been presented. This is the closing date.
All but one of the following are unlawful discrimination because of minority status and thus prohibited under the Federal Fair Housing Act. Which one is not unlawful discrimination?
A) using one set of credit standards for men and one for women
B) canceling leases of white residents who entertain black guests
C) referring minority prospects only to a minority broker or salesperson
D) refusing to loan money to a minority applicant because of a poor credit rating
Leo Edwards, a minority father of 3, came to a real estate office in search of a parcel of real property. The broker should show him:
A) neighborhoods that prefer a specific race
B) properties in minority neighborhoods only
C) the same selection as the broker would show any other person seeking similar property
D) none of the above
What is the purpose of the Fair Housing Act?
A) to provide separate but equal housing
B) to prevent discrimination in housing sales or leasing throughout the U.S.
C) to set construction standards
D) to provide fair treatment among all borrowers when acquiring residential property
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