Why is a borrower asked about their marital status during the loan application process?

Why is a borrower asked about their marital status during the loan application process?

• A. To assess creditworthiness
• B. To determine potential alimony obligations
• C. To complete demographic data for HMDA compliance
• D. To evaluate employment stability

Answer: (C)

A borrower is asked about their marital status during the loan application process primarily to complete demographic data for Home Mortgage Disclosure Act (HMDA) compliance. HMDA requires financial institutions to collect and report specific data about their banking activities, including the demographic characteristics of borrowers. This requirement helps to ensure fair lending practices and allows for monitoring of discrimination in lending. Collecting information about marital status assists in identifying trends and discrepancies that may indicate potential discriminatory practices against certain groups. Although there are other considerations related to a borrower’s marital status, such as assessing alimony obligations and possibly impacting creditworthiness, the primary reason for this inquiry during the application process specifically aligns with regulatory compliance and the collection of demographic data mandated by HMDA.

A borrower is asked about their marital status during the loan application process primarily to complete demographic data for Home Mortgage Disclosure Act (HMDA) compliance. HMDA requires financial institutions to collect and report specific data about their banking activities, including the demographic characteristics of borrowers. This requirement helps to ensure fair lending practices and allows for monitoring of discrimination in lending.

Collecting information about marital status assists in identifying trends and discrepancies that may indicate potential discriminatory practices against certain groups. Although there are other considerations related to a borrower’s marital status, such as assessing alimony obligations and possibly impacting creditworthiness, the primary reason for this inquiry during the application process specifically aligns with regulatory compliance and the collection of demographic data mandated by HMDA.