Department of Housing and Urban Development (HUD)

As the Mortgage Bankers Association gathers for its Regulatory Compliance conference next week in Washington, DC, Mayer Brown’s Consumer Financial Services group will be addressing all the hot topics.

Melanie Brody will be talking about the Equal Credit Opportunity Act (ECOA) on a panel called “Fair Lending and Equal Opportunity Laws” on Sunday, September 16.

On Monday, September 17th, Phillip Schulman will discuss trends in RESPA Section 8 compliance. He will also join in the round-table discussion of RESPA later that afternoon.

Ori Lev will speak on panel entitled “UDAAP Compliance.”

Krista Cooley will be discussing the latest developments in FHA servicing compliance. She will also field questions on the topic during the afternoon servicing round-table.

On Tuesday, September 18th, Keisha Whitehall Wolfe will discuss state compliance issues.

Also in attendance from Mayer Brown will be new partner Michael McElroy, partner David Tallman, and associates Christa Bieker, Joy Tsai, and James Williams.

We look forward to seeing you there!

 

On June 20, the U.S. Department of Housing and Urban Development (“HUD”) published an advance notice of proposed rulemaking (“ANPR”) that seeks public comment on whether and how to amend its 2013 rule under the Fair Housing Act (“FHA”). The ANPR follows HUD’s May 10 announcement of its intention to formally seek public comment on the rule in light of the Supreme Court’s 2015 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., in which the Court recognized disparate impact as a cognizable theory under the FHA, but imposed meaningful limitations on the application of the theory.

The ANPR, together with the statement of Bureau of Consumer Financial Protection Acting Director Mick Mulvaney this spring that the Bureau would be “reexamining the requirements of ECOA” in light of “a recent Supreme Court decision” (i.e., Inclusive Communities), signals that the Trump administration is likely seeking to retreat from the Obama administration’s enthusiastic use of disparate impact liability in lending discrimination cases.

The Disparate Impact Rule and Inclusive Communities

HUD finalized its disparate impact rule in February 2013. The rule codified HUD’s Obama-era view that disparate impact is cognizable under the FHA. In contrast to disparate treatment claims, in which a plaintiff must establish a discriminatory motive, a disparate impact claim challenges practices that have a disproportionately adverse effect on a protected class that is not justified by a legitimate business rationale. The rule states that a practice has a “discriminatory effect” where “it actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin.” HUD explained that it had “consistently concluded” that facially neutral policies that resulted in a discriminatory effect on the basis of a protected characteristic violated the FHA, and that the rule merely “formalize[d] its longstanding view.” The rule also formalized a three-part burden-shifting test for determining whether a practice had an unjustified discriminatory effect.

At the time HUD issued the rule, the nonprofit Inclusive Communities Project, Inc. was embroiled in a lawsuit against the Texas Department of Housing and Community Affairs, in which it brought a disparate impact claim under the FHA. After HUD issued the disparate impact rule, the Texas Department filed a petition for a writ of certiorari to the Supreme Court on whether the FHA recognized disparate impact claims. In its 2015 decision, the Supreme Court held that disparate impact claims are cognizable under the FHA, but the Court articulated a rigorous standard for a successful claim. The Court did not explicitly address the merits of HUD’s rule, nor did the rule form the basis of its holding.  Continue Reading HUD Seeks Public Comment on Disparate Impact Rule