Written By: Karen Deis, Publisher & Sue Flowers, Research Assistant

On March 23, 2004, the Fair Housing Center of Greater Boston filed suit in Federal court against several real estate agencies, accusing them of discriminatory online advertising practices.

The lawsuit is newsworthy because it targets housing discrimination advertising ONLINE instead of the traditional newsprint ads.

The Fair Housing Center claims that the agencies' use of phrases like "professionals only" or "no undergrads please!" violates federal and state laws because the ads using these phrases tend to restrict housing opportunities for people with children or rental subsidies. Since a disproportionate number of families with children or rental subsidies are people of color, the ads thus discriminate against people based on race, color, and national origin, says the nonprofit watch group.

The suit is of particular interest to the mortgage banking industry because similar charges could be brought against websites promoting mortgage programs to special groups.

Searching the web, there are several heavily promoted websites offering home loans to physicians. The homepage of one of these sites assures would-be borrowers that the site specializes "in providing home loans to physicians, from the new resident to the established doctor."

According to the American Medical Association, African-Americans and Hispanics make up only 5.7% of all physicians in the United States (2002 data). Following the Fair Housing Center's premise, does that mean that websites promoting mortgages for physicians discriminate because the number of minority physicians is disproportionately low?

Maybe - maybe not!

Lawyers we consulted for this article disagree on the viability of the Fair Housing Center's suit. The Fair Housing Act prohibits discrimination against a recognized "class" of people. Minorities and women are classes recognized by law, but homosexuals and smokers are not. Thus, it is illegal for a landlord to use phrases like "No minorities", but technically legal for a landlord to say "No smokers".

The Fair Housing Center's argument thus is weakened because the socio-economic group of "non-professionals", those who are not "professionals" and therefore excluded by the offensive phrases, is not a group recognized by anti-discrimination laws.

Extending this back to the example of websites promoting mortgages for physicians, the group of people who are "non-physicians" are not a group recognized by law.

According to attorneys, the Fair Housing Center also has to demonstrate that recognized socioeconomic groups were denied access to equal housing opportunities because of the miscreant advertising. Apparently, lawyers for the nonprofit organization feel they can do so, otherwise they would not have filed suit.

However, when we again extend this analogy back to the physician loan websites, the ability to demonstrate discrimination is even shakier. Our assistant made a telephone call to one of these sites and said that although she wasn't a physician, she was still interested in a home loan.
She was quickly transferred to another loan officer, who was more than happy to discuss her loan needs.

Of course, if the physicians receiving loans from these sites are getting a significantly better rate than non-physicians, there might be an argument.

The concept of exclusionary groups is stretched further when you look at other professions, like teachers. Freddie Mac sponsors teacher mortgage programs (www.mbaa.org), and many mortgage companies offer information about these programs on their websites (www.bankofamerica.com). Thus, analysts suggest that website owners can argue that promoting special mortgages to special groups is already an accepted practice.

The greatest protection that mortgage website owners may have on this issue is the nature of the Internet itself. The U.S. Department of Housing and Urban Development concluded a study in 2002 that looked at discriminatory practices by mortgage lenders (see All Other Things Being Equal: A Paired Testing Study of Mortgage Lending Institutions, www.huduser.org). The study found that, "The pilot test results show that African-American and Hispanic homebuyers face a significant risk of receiving less favorable treatment than comparable whites when they visit mortgage lending institutions to inquire about financing options" (p.iii). The greatest chance for discrimination to occur to a minority is when he or she walks through the mortgage company's front door.

The Internet, however, is a great equalizer. When a loan shopper visits a mortgage company's website looking for information, she interacts with a machine. The programmed website has no concept of race or gender of the visitor - each visitor is the same, as far as the website is concerned. Visitors may fill out an online application or download an application. A machine dispensing URLA's cannot discriminate.

The argument presented in the Fair Housing Center's suit may eventually be applied to online mortgage sites, but the burden of proof is greater, and most sites are well covered.

Does that mean that online mortgage lenders are off the hook?
Of course not! Site managers should follow this suit closely to see how the courts choose to handle online advertising.

Karen Deis, Publisher

Copyright, 2004, LoanOfficerMagazine.com

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