Can a Mortgage Company Discriminate Because of Age?

Minors

The ECOA was designed to make it easier for people of all ages to obtain credit. However, the part of the act that prevents age discrimination includes a special stipulation that you are only protected from age discrimination if you have "the capacity to contract." You cannot sign a contract until you have reached the age of maturity as defined by your state; in most states you reach this age when you turn 18. Since mortgages are binding contracts, you cannot take out a mortgage until you reach the age at which you have the capacity to contract .

When you take out a traditional mortgage, you receive a lump sum of money and your lender secures a lien against your home that remains in place until you have paid off the debt. When you take out a reverse mortgage, you start off with 100 percent equity in your home but you receive monthly income payments from your lender; these payments gradually reduce the equity that you have in your home. Reverse mortgages are designed to provide retirees with supplemental income, and these federal- and state-backed loans are only available to people aged 62 and older.

Logic suggests that you are unlikely to finish paying off a 30-year loan during your lifetime if take out that loan when you are 95 years old. However, the obligation to pay back the loan does not end when you die. Upon your death, the responsibility to repay the loan falls to your estate. Your heirs and your estate executor cannot sell or transfer ownership of your home until the loan has been repaid. Your lender can foreclose on the home if your estate representatives fail to settle the debt.

If you are an older person, you can benefit from the ECOA anti-discrimination rules because you can extract equity in your home just as easily as your younger neighbors can. However, some lenders attempt to coerce elderly people into taking out unnecessary home loans that include hefty upfront costs and significantly monthly payments. Most states have elderly abuse laws that enable you, your friends and family members to report lenders that engage in predatory lending. These rules ensure that lenders do not take advantage of the federal laws that are designed to make credit accessible to people who need and want to borrow.