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This Week in Washington

Should HUD’s Disparate Impact Rule be amended?

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This Week in Washington
Monday, August 27, 2018

The Fair Housing Act standard on disparate impact is dated and should be amended, according to the Mortgage Bankers Association (MBA) and eight other trade groups.

Meanwhile, 17 state attorney generals have joined together in support of retaining the Department of Housing and Urban Development’s (HUD) Disparate Impact Rule that protects people against lending practices that do not mention race, color, religion, national origin, sex, disability or familial status, but produce a discriminatory effect.

In June, HUD began the process to consider rewriting the Disparate Impact Rule.

The MBA, in a letter joined by other industry trade groups, asked HUD to amend the FHA standard on disparate impact that was rendered obsolete by a recent Supreme Court decision.

The letters support HUD’s recently issued Advance Notice of Proposed Rulemaking that would, among other provisions, align the department’s 2013 final rule on disparate impact (a practice or standard that is neutral and non-discriminatory in its intention but disproportionately affects individuals having a disability or belonging to a particular group based on their age, ethnicity, race or sex) with a 2015 Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, in which the court held that disparate impact claims are cognizable under the FHA, according to an MBA news release.

In that case, the Inclusive Communities Project, a Texas-based non-profit organization that assists low-income families in obtaining affordable housing, filed suit against TDHCA, saying it disproportionately allocated too many tax credits in predominantly black inner-city areas and too few in predominantly white suburban neighborhoods. Lower courts supported the Inclusive Communities Project claim, ruling that disparate impact claims are cognizable under the FHA.

TDHCA appealed to the Supreme Court, which in 2015 upheld the lower courts’ rulings. Writing for the majority, Justice Anthony Kennedy wrote that Congress specifically intended to include disparate impact claims in the FHA, but that such claims require a plaintiff to prove it is the defendant’s policies that cause a disparity. The HUD ANPR comes in response to that ruling.

The MBA review of the Disparate Impact Rule and Inclusive Communities showed the court’s outline of the appropriate application of disparate impact under the FHA varied significantly from the one outlined in the HUD Rule.

MBA and the trade groups urged HUD to align the 2013 Final Rule with the standards established by the Supreme Court in Inclusive Communities.

“The mortgage industry expends substantial resources to meet the credit needs of all populations, developing new products and strategies to reach all markets, including underserved markets,” the letter said. “Our members also take very seriously the responsibility of understanding the law and conforming services and product offerings accordingly.”

The MBA said its members strongly support the FHA and fair lending.

“We oppose housing discrimination in all its forms,” according to the letter. “The mortgage industry expends substantial resources to combat illegal discrimination and actively develop new products and strategies to reach underserved markets. Our members also actively seek to understand their responsibilities under the law and conform the conduct accordingly. The Mortgage Bankers Association urges HUD to revise the Disparate Impact Rule to align its burdens and standards of proof with those articulated in the Supreme Court's Inclusive Communities decision."

However, North Carolina Attorney General Josh Stein had a different view.

“It is critically important that we protect people from discrimination in housing,” Stein said in a news release. “I organized this coalition of 17 attorneys general to stand up for people so they are not marginalized because of who they are. I hope HUD will listen and leave this much-needed rule in place.

“Previous disparate impact cases corrected mortgage company practices that led African-American and Hispanic borrowers to pay, on average, hundreds of dollars more for their loans than similarly-situated white borrowers. Today, because of the growing role of data analytics and online data in the housing sale and rental markets, disparate impact enforcement is more important than ever.”

Stein’s comments were signed by the attorneys general of California, the District of Columbia, Illinois, Iowa, Maine, Massachusetts, Maryland, Minnesota, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Virginia, Vermont and Washington.

Joining MBA in the letter were: the American Bankers Association; the Housing Policy Council; the American Financial Services Association; Independent Community Bankers of America; the Consumer Bankers Association; the Consumer Mortgage Coalition; the Real Estate Services Providers Council; and Credit Union National Association.

Today's other top stories
Borrower claims several servicers violated RESPA concerning her loan modification
Housing Affordability Act would raise FHA loan limit
House committee votes to slash CFPB funding
HUD provides $1.8M to support housing for those aging out of foster care
Mortgage credit availability plateaus


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12 USC Section 2605 or Section 6 is titled Servicing of mortgage loans and administration of escrow accounts. It pertains to qualified written requests, notices of transfer of servicing and the administration of escrow accounts.
An arrangement that involves a person who is in a position to refer business as part of a real estate settlement service and who has an interest in a settlement services provider.

In the arrangement, the person, who has either an affiliate relationship with or a direct or beneficial ownership interest of more than one percent in a settlement services provider, directly or indirectly refers business to that provider or influences a consumer to select that provider.
An arrangement that involves a person who is in a position to refer business as part of a real estate settlement service and who has an interest in a settlement services provider.

In the arrangement, the person, who has either an affiliate relationship with or a direct or beneficial ownership interest of more than one percent in a settlement services provider, directly or indirectly refers business to that provider or influences a consumer to select that provider.
A mortgage disclosure that lists all estimated charges and fees associated with your loan. In addition to fees and charges, it will list your loan amount, mortgage rate, loan term and estimated monthly payment. Your escrows due at closing for insurance and taxes will also be outlined. Mortgage lenders are legally required to provide a GFE within three days of receiving your application.
A mortgage disclosure that lists all estimated charges and fees associated with your loan. In addition to fees and charges, it will list your loan amount, mortgage rate, loan term and estimated monthly payment. Your escrows due at closing for insurance and taxes will also be outlined. Mortgage lenders are legally required to provide a GFE within three days of receiving your application.
Under RESPA Section 2605(e)(1)(B), a qualified written request is a written correspondence that includes: 1) the name and account of the borrower, or has enough information to allow the servicer identify that information; and 2) a statement of the reasons for the belief of the borrower that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

A QWR cannot be written on a payment coupon or other payment medium supplied by the servicer.
Under RESPA Section 2605(e)(1)(B), a qualified written request is a written correspondence that includes: 1) the name and account of the borrower, or has enough information to allow the servicer identify that information; and 2) a statement of the reasons for the belief of the borrower that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

A QWR cannot be written on a payment coupon or other payment medium supplied by the servicer.
12 USC Section 2609 or Section 10 is titled Limitation on requirement of advance deposits in escrow accounts. It governs escrow accounts including notifications and statements to borrowers. Section 10 also sets out penalties for those who violate the section.
RESPA Section 3 provides that a thing of value includes any payment, advance, funds, loan, service or other consideration

Regulation X says thing of value includes: monies, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, franchise royalties, credits representing monies that may be paid at a future date, the opportunity to participate in a money-making program, retained or increased earnings, increased equity in a parent or subsidiary entity, special bank deposits or accounts, special or unusual banking terms, services of all types at special or free rates, sales or rentals at special prices or rates, lease or rental payments based in whole or in part on the amount of business referred, trips and payment of another person’s expenses or reduction in credit against an existing obligation.
A form used by a settlement or closing agent itemizing all charges imposed on a borrower and seller in a real estate transaction. This form represents the closing transaction and provides each party with a complete list of incoming and outgoing funds. RESPA requires the HUD-1 to be used as the standard real estate settlement form in all transactions in the U.S. involving federally related mortgage loans.
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