Fair Housing & Social Media

Since the Fair Housing Act was enacted as part of the historic 1968 Civil Rights Act, it’s continually been in the news. As complicated as the act may seem, the rules around it, especially about Fair Lending, are important for every Mortgage Loan Originator (MLO) to know, especially in how products are marketed.

What exactly is the Fair Housing Act?

The Fair Housing Act (FHAct) prohibits discrimination in all aspects of “residential real-estate related transactions.” If your organization makes loans to buy, build, repair, or improve a house or business location; or to buy an existing real estate property, you are subject to the regulations associated with the FHAct. This is also true if you rent, sell, broker, or appraise real estate.

The law was created to prevent discrimination against would be borrowers and renters, particularly those who have historically been turned away based on things like skin color or religion—obvious examples that most people can probably identify as a violation of the regulation. But the list also includes national origin, sex, whether or not you have children, pregnancy and disabilities.

Mortgage lending institutions are also subject to the Equal Credit Opportunity Act (ECOA) which has additional protections surrounding credit transactions and scores. As a lending institution, your organization has to make sure it complies with fair lending laws outlined in ECOA and the FHAct, both on paper and online.

One way lending institutions signify they abide by the law is to use the Equal Housing logo to indicate their compliance with the FHAct. The exact logo or verbiage may differ depending on the type of lending institution you are (credit union, state bank, national bank, etc.). As a general best practice, Loan Officers should make a habit of including the wording or logo used by their institution when sharing information or advertising loan products.

Why does this matter?

Regulators are looking everywhere to ensure that consumers are properly protected, including online on social media. How lenders market their products and services as it relates to fair lending laws is of great interest to regulators and compliance officers, and social media offers plenty of pitfalls if you aren’t careful. Facebook is one example.

Facebook has many tools to help businesses identify potential customers with laser like precision, but knowingly, or inadvertently, some companies were using the tools to discriminate.

Advertisers on Facebook can exclude people who weren’t born in America, or who identify as something other than Christian. Because Facebook allows advertisers to avoid these people, or certain ZIP codes, businesses could eliminate entire groups of people from ever seeing their advertisements. For most industries, this is a matter of personal preference or moral conscience, but because MLOs must abide by the Fair Housing and Fair Lending regulations, there are potential penalties awaiting Loan Officers or marketing executives who choose options that discriminate against protected groups.

According to the FHA, MLOs must provide the same information or services regarding any aspect of the lending process everywhere it appears. This includes credit availability, application procedures, or lending standards. Your marketing officers and LOs should not discourage or selectively encourage applicants to apply for credit. On social media posts, the terms of credit offered cannot vary, including the amount, interest rate, duration, or type of loan, depending on who has been selected to see it.

Should you post on social media about your great mortgage offers?

The answer? Yes, but be aware of compliance issues the post can create. Regulators are looking for advertising patterns or practices that a reasonable person would believe indicate certain kinds of customers are preferred over others deemed less desirable because of their race, religion or national origin.

Regulators are watching for things like your LO only advertising certain products to defined groups of people, like specific builders, realtors, or isolated zip-codes. It’s fairly common to use a mailing or distribution list but if the list is prescreened to weed out certain zip codes within an institutions marketing area and the zip code has a high percentage of the protected population, you may be headed for trouble.

Fair Housing Complaints There are red flags, and then there are neon signs, and a glaring neon sign for regulators are consumer complaints alleging discrimination in advertising or marketing loans. Every institution should take complaints very seriously and respond quickly and thoroughly.

If you see your organization may be involved in any of these potentially problematic behaviors, take action now. Here are a few things you should do:

  1. Review all marketing initiatives. Take a hard look at how the institution determines who gets solicitations. Examine your media buys. For print and broadcast, identify any racial or national origin identity associated with those outlets. The same applies for social media. Because social media has the ability to drill down to the most granular level, it is ripe for discrimination.
  2. Have a written plan for how you market to people, including social media. Define your target audience and make sure you are adhering to it. Look for disparities between minority and non-minority groups.
  3. Implement a strategy for reviewing social media posts. Look for wording that could be discriminatory. Have a process in place that makes placing the Equal Opportunity Houston logo natural and automatic.

Knowing how the regulations about Fair Lending work will help protect your organization and the Loan Officers, while providing fair and equitable access to the clients you serve.