12 Cfr 701.31

National Credit Union Administration

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§ 701.31 Nondiscrimination
ments.

§ 701.31

require-

(a) Definitions. As used in this part,
the term:
(1) Application carries the meaning of
that term as defined in 12 CFR 1002.2(f)
(Regulation B)

(2) Dwelling carries the meaning of
that term as defined in 42 U.S.C. 3602(b)
(Fair Housing Act), which is as follows:
‘‘Any building, structure, or portion
thereof which is occupied as, or designed or intended for occupancy as, a
residence by one or more families, and
any vacant land which is offered for
sale or lease for the construction or location thereon of any building, structure, or portion thereof’’; and
(3) Real estate-related loan means any
loan for which application is made to
finance or refinance the purchase, construction, improvement, repair, or
maintenance of a dwelling.
(b) Nondiscrimination in Lending. (1) A
Federal credit union may not deny a
real estate-related loan, nor may it discriminate in setting or exercising its
rights pursuant to the terms or conditions of such a loan, nor may it discourage an application for such a loan,
on the basis of the race, color, national
origin, religion, sex, handicap, or familial status (having children under
the age of 18) of:
(i) Any applicant or joint applicant;
(ii) Any person associated, in connection with a real estate-related loan application, with an applicant or joint
applicant;
(iii) The present or prospective owners, lessees, tenants, or occupants of
the dwelling for which a real estate-related loan is requested;
(iv) The present or prospective owners, lessees, tenants, or occupants of
other dwellings in the vicinity of the
dwelling for which a real estate-related
loan is requested.
(2) With regard to a real estate-related loan, a Federal credit union may
not consider a lending criterion or exercise a lending policy which has the
effect of discriminating on the basis of
race, color, national origin, religion,
sex, handicap, or familial status (having children under the age of 18).
Guidelines concerning possible exceptions to this provision appear in paragraph (e)(1) of this section.
(3) Consideration of any of the following factors in connection with a
real estate-related loan is not necessary to a Federal credit union’s business, generally has a discriminatory effect, and is therefore prohibited:

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§ 701.31

12 CFR Ch. VII (1–1–16 Edition)

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(i) The age or location of the dwelling;
(ii) Zip code of the applicant’s current residence;
(iii) Previous home ownership;
(iv) The age or location of dwellings
in the neighborhood of the dwelling;
(v) The income level of residents in
the neighborhood of the dwelling.
Guidelines concerning possible exceptions to this provision appear in paragraph (e)(2) of this section.
(c) Nondiscrimination in appraisals. (1)
A Federal credit union may not rely
upon an appraisal of a dwelling if it
knows or should know that the appraisal is based upon consideration of
the race, color, national origin, religion, sex, handicap, or familial status
(having children under the age of 18) of:
(i) Any applicant or joint applicant;
(ii) Any person associated, in connection with a real estate-related loan application, with an applicant or joint
applicant;
(iii) The present or prospective owners, lessees, tenants, or occupants of
the dwelling for which a real estate-related loan is requested;
(iv) The present or prospective owners, lessees, tenants, or occupants of
other dwellings in the vicinity of the
dwelling for which a real estate-related
loan is requested.
(2) With respect to a real-estate related loan, a Federal credit union may
not rely upon an appraisal of a dwelling if it knows or should know that the
appraisal is based upon consideration
of a criterion which has the effect of
discriminating on the basis of race,
color, national origin, religion, sex,
handicap, or familial status (having
children under the age of 18). Guidelines concerning possible exceptions to
this provision appear in paragraph
(e)(1) of this section.
(3) A Federal credit union may not
rely upon an appraisal that it knows or
should know is based upon consideration of any of the following criteria,
for such criteria generally have a discriminatory effect, and are not necessary to a Federal credit union’s business:
(i) The age or location of the dwelling;
(ii) The age or location of dwellings
in the neighborhood of the dwelling;

(iii) The income level of the residents
in the neighborhood of the dwelling.
(4) Notwithstanding paragraph (c)(3)
of this section, it is recognized that
there may be factors concerning location of the dwelling which can be properly considered in an appraisal. If any
such factor(s) is relied upon, it must be
specifically documented in the appraisal, accompanied by a brief statement demonstrating the necessity of
using such factor(s). Guidelines concerning the consideration of location
factors appear in paragraph (e)(3) of
this section.
(5) Each Federal credit union shall
make available, to any requesting
member/applicant, a copy of the appraisal used in connection with that
member’s application for a loan to be
secured by a subordinate lien on a
dwelling. The appraisal shall be available for a period of 25 months after the
applicant has received notice from the
Federal credit union of the action
taken by the Federal credit union on
the application for a loan to be secured
by a subordinate lien on a dwelling.
(d) Nondiscrimination in advertising.
No federal credit union may engage in
any form of advertising of real estaterelated loans that indicates the credit
union discriminates on the basis of
race, color, religion, national origin,
sex, handicap, or familial status in violation of the Fair Housing Act. Advertisements must not contain any words,
symbols, models or other forms of communication that suggest a discriminatory preference or policy of exclusion
in violation of the Fair Housing Act or
the Equal Credit Opportunity Act.
(1) Advertising notice of nondiscrimination compliance. Any federal credit
union that advertises real estate-related loans must prominently indicate
in such advertisement, in a manner appropriate to the advertising medium
and format used, that the credit union
makes such loans without regard to
race, color, religion, national origin,
sex, handicap, or familial status.
(i) With respect to written and visual
advertisements, a credit union may
satisfy the notice requirement by including in the advertisement a copy of
the logotype, with the legend ‘‘Equal

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National Credit Union Administration

§ 701.31

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Housing Lender,’’ from the poster described in paragraph (d)(3) of this section or a copy of the logotype, with the
legend ‘‘Equal Housing Opportunity,’’
from the poster described in § 110.25(a)
of the United States Department of
Housing and Urban Development’s
(HUD) regulations (24 CFR 110.25(a)).
(ii) With respect to oral advertisements, a credit union may satisfy the
notice requirement by a spoken statement that the credit union is an
‘‘Equal Housing Lender’’ or an ‘‘Equal
Opportunity Lender.’’
(iii) When an oral advertisement is
used in conjunction with a written or
visual advertisement, the use of either
of the methods specified in paragraphs
(d)(1)(i) or (ii) of this section will satisfy the notice requirement.
(iv) A credit union may use any other
method reasonably calculated to satisfy the notice requirement.

(2) Lobby notice of nondiscrimination.
Every federal credit union that engages
in real estate-related lending must display a notice of nondiscrimination. The
notice must be placed in the public
lobby of the credit union and in the
public area of each office where such
loans are made and must be clearly
visible to the general public. The notice must incorporate either a facsimile of the logotype and language appearing in paragraph (d)(3) of this section or the logotype and language appearing at 24 CFR 110.25(a). Posters
containing the logotype and language
appearing in paragraph (d)(3) of this
section may be obtained from the regional offices of the National Credit
Union Administration.
(3) Logotype and notice of nondiscrimination compliance. The logotype
and text of the notice required in paragraph (d)(2) of this section shall be as
follows:

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12 CFR Ch. VII (1–1–16 Edition)

(e) Guidelines. (1) Compliance with
the Fair Housing Act is achieved when
each loan applicant’s creditworthiness
is evaluated on an individual basis,

without presuming that the applicant
has certain characteristics of a group.

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ER21MR12.003

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§ 701.31

lpowell on DSK54DXVN1OFR with $$_JOB

National Credit Union Administration

§ 701.31

If certain lending policies or procedures do presume group characteristics, they may violate the Fair Housing
Act, even though the characteristics
are not based upon race, color, sex, national origin, religion, handicap, or familial status. Such a violation occurs
when otherwise facially nondiscriminatory lending procedures (either general lending policies or specific criteria
used in reviewing loan applications)
have the effect of making real estaterelated loans unavailable or less available on the basis of race, color, sex, national origin, religion, handicap, or familial status. Note, however, that a
policy or criterion which has a discriminatory effect is not a violation of
the Fair Housing Act if its use achieves
a legitimate business necessity which
cannot be achieved by using less discriminatory standards. It is also important to note that the Equal Credit
Opportunity Act and Regulation B prohibit discrimination, either per se or in
effect, on the basis of the applicant’s
age, marital status, receipt of public
assistance, or the exercise of any rights
under the Consumer Credit Protection
Act.
(2) Paragraph (b)(3) of this section
prohibits consideration of certain factors because of their likely discriminatory effect and because they are not
necessary to make sound real estaterelated loans. For purposes of clarification, the prohibited use of location factors in this section is intended to prevent abandonment of areas in which a
Federal credit union’s members live or
want to live. It is not intended to require loans in those areas that are geographically remote from the FCU’s
main or branch offices or that contravene the parameters of a Federal
credit union’s charter. Further, this
prohibition does not preclude requiring
a borrower to obtain flood insurance
protection pursuant to the National
Flood Insurance Act and part 760 of
NCUA’s Rules and Regulations, nor
does it preclude involvement with Federal or state housing insurance programs which provide for lower interest
rates for the purchase of homes in certain urban or rural areas. Also, the legitimate use of location factors in an
appraisal does not constitute a violation of the provision of paragraph (b)(3)

of this section, which prohibits consideration of location of the dwelling. Finally, the prohibited use of prior home
ownership does not preclude a Federal
credit union from considering an applicant’s payment history on a loan which
was made to obtain a home. Such action entails consideration of the payment record on a previous loan in determining creditworthiness; it does not
entail consideration of prior home ownership.
(3)(i) Paragraph (c)(3) of this section
prohibits consideration of the age or
location of a dwelling in a real estaterelated loan appraisal. These restrictions are intended to prohibit the use
of unfounded or unsubstantiated assumptions regarding the effect upon
loan risk of the age of a dwelling or the
physical or economic characteristics of
an area. Appraisals should be based on
the present market value of the property offered as security (including consideration of specific improvements to
be made by the borrower) and the likelihood that the property will retain an
adequate value over the term of the
loan.
(ii) The term ‘‘age of the dwelling’’
does not encompass structural soundness. In addition, the age of the dwelling may be used by an appraiser as a
basis for conducting further inspections of certain structural aspects of
the dwelling. Paragraph (c)(3) of this
section does, however, prohibit an unsubstantiated determination that a
house over X years in age is not structurally sound.
(iii) With respect to location factors,
paragraph (c)(4) of this section recognizes that there may be location factors which may be considered in an appraisal, and requires that the use of
any such factors be specifically documented in the appraisal. These factors
will most often be those location factors which may negatively affect the
short range future value (up to 3–5
years) of a property. Factors which in
some cases may cause the market
value of a property to decline are recent zoning changes or a significant
number of abandoned homes in the immediate vicinity of the property. However, not all zoning changes will cause
a decline in property values, and proximity to abandoned buildings may not

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§ 701.32

12 CFR Ch. VII (1–1–16 Edition)

affect the market value of a property
because the cause of abandonment is
unrelated to high risk. Proper considerations include the condition and utility of the improvement and various
physical factors such as street conditions, amenities such as parks and
recreation areas, availability of public
utilities and municipal services, and
exposure to flooding and land faults.

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[54 FR 46223, Nov. 2, 1989, as amended at 59
FR 36041, July 15, 1994; 66 FR 48206, Sept. 19,
2001; 77 FR 16426, Mar. 21, 2012; 77 FR 71084,
Nov. 29, 2012; 79 FR 75748, Dec. 19, 2014]

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