Chapter 9Chapter 9Federal Housing Federal Housing Policies: Part TwoPolicies: Part Two

Chapter 9 Chapter 9 Learning ObjectivesLearning Objectives

Understand how federal laws Understand how federal laws protect the home buyer from protect the home buyer from discrimination in sales and discrimination in sales and financing financing

Understand the theories of Understand the theories of discrimination discrimination

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FAIR HOUSING ACT (1968)FAIR HOUSING ACT (1968)

Part of Civil Rights Act of 1968Part of Civil Rights Act of 1968 Prohibits discrimination in sale or Prohibits discrimination in sale or

renting of residential housing on renting of residential housing on the basis of race, color, religion, or the basis of race, color, religion, or national originnational origin

Gender was added in 1974Gender was added in 1974 Designed to prevent “blockbusting”Designed to prevent “blockbusting”

EQUAL CREDIT EQUAL CREDIT OPPORTUNITY ACT (1974)OPPORTUNITY ACT (1974)

Prevents discrimination in the Prevents discrimination in the credit market based on gender and credit market based on gender and marital statusmarital status

Extended to protect on basis of Extended to protect on basis of age, race, national origin, religion, age, race, national origin, religion, color, welfare recipient and those color, welfare recipient and those previously filing with ECOApreviously filing with ECOA

IDENTIFYING IDENTIFYING DISCRIMINATIONDISCRIMINATION

Effects method - minority groups Effects method - minority groups are underrepresented in the class are underrepresented in the class of credit recipients relative to of credit recipients relative to general populationgeneral population

Intent approach - lender intends to Intent approach - lender intends to treat minorities differentlytreat minorities differently

Practices method - lender fails to Practices method - lender fails to adhere to established guidelinesadhere to established guidelines

ECONOMIC THEORY OF ECONOMIC THEORY OF DISCRIMINATIONDISCRIMINATION

Preference for discrimination - Preference for discrimination - having a “taste” for discrimination having a “taste” for discrimination gives psychological satisfactiongives psychological satisfaction

Economics of information - cost of Economics of information - cost of obtaining information may be obtaining information may be greater than the benefits (marital greater than the benefits (marital status or young single males are status or young single males are examples)examples)

HOME MORTGAGE HOME MORTGAGE DISCLOSURE ACT (1975) DISCLOSURE ACT (1975)

Discourages lending institutions Discourages lending institutions from avoiding certain neighborhoodsfrom avoiding certain neighborhoods

Followed by the Community Followed by the Community Reinvestment Act in 1978 which Reinvestment Act in 1978 which encourages lenders to evaluate encourages lenders to evaluate lending patterns in their defined lending patterns in their defined communitycommunity

Discourages “redlining” or “FHAing” Discourages “redlining” or “FHAing” a neighborhooda neighborhood

FAIR HOUSING FAIR HOUSING AMENDMENTS ACT OF AMENDMENTS ACT OF

19881988

Prohibits discrimination in renting Prohibits discrimination in renting on basis of age, number and gender on basis of age, number and gender of children, and disabilitiesof children, and disabilities

Housing includes apartment Housing includes apartment complexes, single-family homes, complexes, single-family homes, condos, co-ops, and mobile homescondos, co-ops, and mobile homes

Exemptions for older adultsExemptions for older adults Handicap may be physical or mentalHandicap may be physical or mental