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.