Are there any prohibitions with offering a discount (through a general lender credit) to customers who obtain a construction to perm mortgage in certain newly developed subdivisions or specific condos? The credit would not be available for all C/P loans, just those in certain subdivisions/condos - but the discount would not be based on a prohibited basis.

If any banks have offered discount programs like this, have you had any issues during your fair lending exams?

Thank you in advance!

What is the actual underlying reason for doing this? There has to be one.

Newly developed subdivisions or specific condos? Look at the Fair Lending Exam Procedures under "Effects Test". If the properties are primarily (occupancy/marketed to/etc.) non-minorities, it may be an issue

Disparate Impact (From the OCC)
When a bank applies a racially or otherwise neutral policy or practice equally to all credit applicants, but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis, the policy or practice is described as having a “disparate impact.”2 - (2 Disparate impact has been referred to more commonly by the OCC as “disproportionate adverse impact.” It is also referred to as the “effects test.”)

The fact that a policy or practice creates a disparity on a prohibited basis is not by itself proof of a violation. When the OCC finds that a bank’s policy or practice has a disparate impact, the OCC seeks to determine whether the policy or practice is justified by “business necessity.” The justification must be manifest and may not be hypothetical or speculative. Factors that may be relevant to the justification could include cost and profitability. Even if a policy or practice that has a disparate impact on a prohibited basis can be justified by business necessity, it still may be found to be in violation if an alternative policy or practice could serve the same purpose with less discriminatory effect. Finally, evidence of discriminatory intent is not necessary to establish that a bank’s adoption or implementation of a policy or practice that has a disparate impact is in violation of the FH Act or ECOA.