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Mortgage lenders review loan applicants from all walks of life, including those previously convicted of a crime. Deciding whether or not to grant them the loan can be complicated. To learn more about the risks involved in these loans and the laws governing lending in these situations, read what these financial experts below had to say.
Mayer Dallal, Managing Director at MBANC.
Look for a Directly Related Conviction
Everyone needs a place to live. So, while it is legal to check an applicant’s criminal history, housing discrimination against a protected class is illegal. For example, if a lender was only checking the criminal histories of people of certain racial or ethnic backgrounds, that would be illegal housing discrimination.
California’s laws specify that you can only deny housing because of a directly related conviction. So, for example, if someone had a DUI ten years ago, that’s not directly related to your ability to buy a house. But, if someone was convicted of real estate fraud or arson [because] they burned an apartment down one year ago, that could reasonably be considered directly related to housing and safety, and it’s more recent. You have to consider how recent the crime was and how severe it was.
In California, it’s also illegal to consider someone who was arrested but not convicted [guilty of a crime] because you are innocent until proven guilty in court. If the crime is an ‘infraction,’ a minor crime like speeding, you can’t hold that against someone. You also have to make sure the information you’re considering is accurate. It can’t just be a rumor. You have to verify, and if it’s an adult, and they have a criminal record from when they were a juvenile, that’s also not considered fair game.
It can get a little complicated, what you can and can’t take into account, and it’s concerning if you find out someone has a criminal record. But generally, if you check in with the Department of Fair Housing and follow their advice, you’ll be in good shape.