According to Andrew Ackerman of Market Screener, banks and mortgage lenders are urging the Trump administration to dispose of a plan to water-down an Obama-era regulation aimed at combating discrimination in housing, claiming it is inappropriate amid the national reckoning on race.
Bank of America Corp. and Quicken Loans Inc. in recent days came out against the initiative, which would make it harder to pursue housing-discrimination cases by raising the burden of proof needed to bring a claim. Lenders were generally supportive of the changes when they were floated last year.
“Given the recent protests and events, and the recognition of where we are as a country, we would respectfully offer that the time is not right to issue a new rule,” Bank of America Vice Chairman Anne Finucane wrote in a June 29 letter seen by The Wall Street Journal and not previously reported.
On July 13, 2020, The National Association of Realtors also urged the Department of Housing and Urban Development to do away with the plan to water-own the housing regulation.
What is the Obama-era Regulation?
The Obama administration in 2013 set out guidelines for bringing discrimination cases against mortgage lenders, developers and home insurers. Under those guidelines, the defendants must show that they have a reasonable business objective for their policies.
Who Enforces the Fair Housing Act?
HUD is charged with enforcing the Fair Housing Act, a landmark antidiscrimination law enacted in 1968.
“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,” NAR President Vince Malta wrote to HUD secretary Ben Carson.
And in a separate letter on Friday, Quicken urged HUD to reconsider its proposal, citing a “rising awareness surrounding issues of racial justice, equity, and inclusion.”
At issue is the “disparate-impact rule.”
What is the Disparate-impact Rule?
The “disparate-impact rule” allows plaintiffs to use statistical analysis to demonstrate that lenders and/or housing providers promote policies that have a disproportionately adverse impact on minorities.
As a result, plaintiffs can claim that banks, landlords or other firms violate fair-housing laws without necessarily proving they did so with an intent to discriminate.
Increasing Plaintiff’s Burden of Proof
A new plan floated last year would put a bigger burden of proof on the plaintiffs and require them to clear a five-part test to bring a fair-housing case — including evidence that the allegedly discriminatory practice is “arbitrary, artificial and unnecessary.”
HUD said the modifications would create clearer legal standards in line with a 2015 Supreme Court decision that upheld the concept of “disparate impact” in fair-housing cases.
A HUD spokesman, Bradley Bishop, declined to comment on the plan while it is under review with the White House Office of Management and Budget.
Critics Claim that Changes Would Make it Harder to Bring Discrimination Cases
Courts have consistently upheld the “disparate-impact doctrine.”
However, these courts tend to give deference to the government’s interpretation of the laws it enforces.
Because few people or organizations admit to racist views or policies, there is rarely a paper trail proving intentional discrimination, which has made disparate impact a key legal tool for civil-rights advocates.
“This is a big flip,” said Mike Calhoun, president of the Center for Responsible Lending, which had urged lenders to reconsider their support for the HUD plan. “The industry wanted certainty against legal claims. It’s now saying we realize this rule, which clearly gives them that, undermines the broader societal goal of how do we really address these structural barriers.”
Lisa Rice, president and chief executive of the National Fair Housing Alliance, said lenders have become increasingly uncomfortable with President Trump’s rhetoric on race, a factor in their decision to distance themselves from the HUD plan.
“This is not sitting well with people,” she said in an interview with Mr. Calhoun.