United States

Creditors reminded to consider all pub assist income in underwriting


The (Consumer Financial Protection Bureau (CFPB) recently released its second bulletin of the year, Bulletin 2015-2, reminding creditors of their obligation under the Equal Credit Opportunity Act (ECOA) to consider sources of income obtained through public assistance programs in the application and underwriting process. Under ECOA, creditors are prohibited from discriminating in any aspect of a credit transaction against an applicant "because all or part of the applicant's income derives from any public assistance program." Public assistance programs include the Section 8 Housing Choice Voucher (HCV) Homeownership Program funded by the U.S. Department of Housing and Urban Development (HUD) and administered through local public housing authorities.

The CFPB has become aware of instances in which creditors are excluding or refusing to consider income derived from this program, or are otherwise limiting the consideration of such income to certain mortgage products and delivery channels. The CFPB cited the potential for disparate impact and disparate treatment violations in the bulletin as a result of this practice, and is recommending clear underwriting policies, training and monitoring to help manage the ECOA and fair lending risk in this area.