Housing Counselor Certification (HUD) Practice Exam

What regulation prohibits lenders from discriminating against borrowers using public assistance?

1. Fair Housing Act (FHA)

2. Equal Credit Opportunity Act (ECOA)

3. Consumer Financial Protection Act (CFPA)

4. Home Mortgage Disclosure Act (HMDA)

The correct answer is: Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act (ECOA) is the regulation that specifically prohibits lenders from discriminating against borrowers based on various protected characteristics, including the use of public assistance as a source of income. The ECOA ensures that all consumers have equal access to credit opportunities, regardless of their financial situation or the support they may receive from government assistance programs. This piece of legislation is crucial in promoting equitable lending practices, as it not only prevents discrimination based on traditional factors like race, gender, or marital status but also includes the protection of individuals who rely on governmental financial support. By recognizing public assistance as a legitimate source of income, the ECOA helps to empower borrowers who might otherwise face challenges in securing loans due to their financial circumstances. The other regulations listed do address important aspects of housing and lending, but they focus on different facets of consumer rights and protections. For instance, the Fair Housing Act primarily addresses discrimination in housing based on protected classes in real estate transactions, while the Consumer Financial Protection Act focuses more broadly on protecting consumers in financial markets. The Home Mortgage Disclosure Act pertains to transparency in lending practices and requires lenders to disclose data about the mortgage loans they originate, but it does not specifically target discrimination based on public assistance.