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Supreme Court Rules on DOMA—Fair Lending Impact to Mortgage Lenders!

On June 26, 2013, the U.S. Supreme Court, in U.S. v. Windsor, ruled that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional because it violates the Fifth Amendment’s equal protection guaranty for persons of the same sex who are legally married under the laws of their state of residence.

This ruling has many implications for the financial industry; including mortgages.  Specifically, I’m going to focus on the Fair Lending Implications.  HUD presently has the LGTB (Lesbian, Gay, Transgender and Bi-Sexual) ruling which prohibits discrimination based on sexual orientation.  The Supreme Court takes this one step further in declaring that section 3 is unconstitutional, which references that only a man and woman can be married.  Many State legislators have used the DOMA legal argument as reason to recognize marriage as only that of a man and a woman.  Now that this has become declared unconstitutional, those who are legally married under the laws of their state of residence may classify themselves as “married”.

So what does this have to do with Fair Lending?

  1.  In States where same-sex marriage is legal and recognized, you must now recognize the couple as “married” and the partner as a “spouse”.  Here are the present states where same-sex marriage is legal: Connecticut, Delaware (effective July 1, 2013), the District of Columbia, Iowa, Maine, Maryland, Massachusetts, Minnesota (effective August 1, 2013), New Hampshire, New York, Rhode Island (effective August 1, 2013), Vermont and Washington. The term “married” refers to a marriage which is legal and appropriately licensed under the laws of the jurisdiction in which it was performed, and the term “spouse” has a correlative meaning.
  2. Check with your investors to confirm that the way you want to handle this new legal issue is acceptable to their policy.
  3. Is your staff in each of these states trained under the new ruling?
  4. Are they filling out the paperwork properly and applying the correct marital status to the client when requested to do so?
  5. Are they schooled in the types of title that are now available based on legally married couples?
  6. Have you updated your policies and procedures to address this issue?

Taking a pro-active stance on this issue will save quite a few headaches when faced with CFPB complaints or HUD referrals.

Tammy Butler, Master CMB

Author Tammy Butler, Master CMB

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