Fair Lending 2.0: A Borrower-Based Solution to Discrimination in Mortgage Lending

Abstract

Fair lending promises that borrowers of similar credit profiles will receive similar loan products - regardless of their race. Yet, study after study reveals that black and Latino borrowers consistently receive loan products that are inferior to those of white borrowers with similar credit characteristics. Despite frequent amendments since their passage during the Civil Rights Era, the Fair Lending Laws that opened doors that were once completely closed to minority borrowers are unable to root out the subtle discrimination that persists in today’s mortgage lending market. These traditional Fair Lending Laws are built on an outdated framework that focuses exclusively on punishing lenders and righting past wrongs. This article proposes a new borrower-based approach to solving discrimination in lending. This new framework gives borrowers the tools to effectively understand and compare loan offers, reduces the complexity of loan products, and enhances the ability of borrowers to receive loan offers from a variety of potential lenders. This article also provides examples of tools derived from the new borrower-based approach, including a novel loan comparison report, that have the potential to take us the last mile toward a true fair lending environment.