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HUD Responds to Fair Housing Act Criticisms

The U.S. Department of Housing and Urban Development (HUD) is pushing back at efforts to force its withdrawal of a proposed rule to amend its interpretation of the Fair Housing Act’s disparate impact standard, according to a piece from Politico.

In announcing the proposed rule last August, HUD insisted it would not impact its determinations of intentional discrimination, citing a 2015 decision by the U.S. Supreme Court that upheld the use of the “disparate impact” theory to establish liability under the Fair Housing Act for business policies and local ordinances, even if the policy or ordinance was neutral but still resulted in a disproportionate impact on a protected class without legally sufficient justification.

HUD noted at the time that the proposed disparate impact rule would provide a “framework for establishing legal liability for facially neutral practices that have unintended discriminatory effects on classes of persons protected under the Fair Housing Act.”

For the past few weeks, HUD has been pressured by executives within the real estate finance industry to rescind its proposed rule. Bank of America Vice Chairman Anne Finucane expressed her concerns in a letter to Federal Housing Commissioner Brian D. Montgomery, citing the national protests for social equality following the death of George Floyd in Minneapolis police custody.

“Over the last several weeks, our nation has experienced a series of tragic events that have led to a collective heightened awareness of systemic racism,” Finucane wrote. “We have all witnessed the expressions of anguish and anger about what has happened and have developed a greater understanding of and sensitivity to the historical roots of those feelings … Given the importance of this moment in history and the very real prospect of progress, we respectfully urge that this is not a time for actions, however well-intentioned, that some will interpret as diminishing hard-fought protections. Rather, it is a time for thoughtful reflection so that we can drive meaningful progress on equity and inclusion.”

Michael DeVito, EVP and Head of Home Lending at Wells Fargo, sent a letter to HUD Secretary Dr. Benjamin Carson expressing his concern on the timing of the proposed rule.

“We appreciate HUD’s efforts to draft the proposed rule, and we support a disparate

impact framework that facilitates the expansion of housing opportunities to underserved communities and provides a clear legal framework to address discrimination,” DeVito wrote. “To achieve that goal, HUD should acknowledge that Americans’ attention to racial discrimination is more pronounced and expansive than when the comment period was open last year. People across the country have considered more closely that centuries of discrimination, segregation, and economic disenfranchisement have lasting impacts today, including discriminatory effects in housing.”

The National Association of Realtors (NAR) also sent a letter to Carson stating the proposed rule is coming at the wrong time.

“While there is debate … as to whether additional clarity is needed with respect to disparate impact claims, there is broad consensus across the country that now is not the time to issue a regulation that could hinder further progress toward addressing ongoing systemic racism,” wrote NAR President Vince Malta. “We believe this is the time to explore how we may work together to eliminate unnecessary barriers to housing opportunity and advance policies that allow more Americans to fully participate in the American Dream … and respectfully ask that HUD withdraw its proposed rule to amend its interpretation of the Fair Housing Act’s disparate impact standard.”

Rocke Andrews, president of the National Association of Mortgage Brokers, also expressed disappointment with HUD’s actions.

“Disparate impact in the past has been used to some think unfairly penalize lenders/banks for unintended discrimination,” he said. “Lenders believe the discrimination should be brought to their view and allowed to correct while previous administration at CFPB believed the best way to get their message out (and generate income) was fines. In the present pandemic environment and still unequal distribution of housing among minorities it is thought not to be the best time to eliminate this tool.”

Executives from Citi, and Quicken Loans also voiced concern over the proposed rule going into effect. Nikitra Bailey, EVP at the Center for Responsible Lending, praised the industry leaders for speaking up on the issue.

“These industry leaders recognize that we can’t backtrack on disparate impact theory at a time when our nation is facing a reckoning over structural racism and inequality,” Bailey said. “Doing so will only perpetuate racial wealth and homeownership gaps … HUD’s move shifts the burden of proof in cases of discrimination from the powerful to the vulnerable, undoing decades of legal precedent and diminishing opportunities for hardworking families to build and hold wealth. HUD must reverse course and ensure that we all live in inclusive communities with an ability to share in the nation’s prosperity.”

Carson responded to the claims during an interview with Yahoo.

“I’m very glad that Bank of America is interested in this issue,” he said “And you know, they could do a whole lot to improve the situation for minorities by rejoining the FHA’s program for housing. FHA, as you know, is the largest backer of insurance for forward mortgages for minorities, for first-time homebuyers, doing over a million cases last year. Bank of America did about 2,200. So, if they really want to have an impact, this is what they should be thinking about, rather than criticizing a program that they haven't even seen and don't know anything about."

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.

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