MBA, Trade Groups Urge HUD to Amend Fair Housing Act Disparate Impact Standard
The Mortgage Bankers Association, in its own letter and in a separate letter joined by other industry trade groups, asked HUD to amend a dated Fair Housing Act 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 Fair Housing Act.
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 Fair Housing Act.
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 Fair Housing Act, 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 Fair Housing Act varies significantly from the one outlined in the HUD Rule.
MBA said specifically, the Rule must require that disparate impact plaintiffs “establish robust causality between an impermissible disparity and a specific policy that is artificial, arbitrary and unnecessary. The Rule must focus on removing ‘artificial barriers to housing’ and not be used to second guess valid business decisions. By failing to incorporate these standards, the HUD Rule ignores the fundamental principle underpinning Inclusive Communities: that ‘[d]isparate-impact liability must be limited so employers and other regulated entities are able to make the practical business choices and profit-related decisions that sustain a vibrant and dynamic free-enterprise system.'”
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 letters noted HUD’s 2013 analysis of disparate impact under the Fair Housing Act differs materially from the principles articulated by the Supreme Court. Most significantly, the HUD 2013 Final Rule is not–as Inclusive Communities requires–appropriately calibrated to prevent disparate impact liability from unfairly penalizing practical business choices. Under Inclusive Communities, claims for disparate impact must establish robust causality between an impermissible disparity and a specific policy that is artificial, arbitrary, and unnecessary. Disparate impact liability must focus on removing “artificial barriers to housing” and not be used to second-guess valid business decisions.
“The inconsistencies between the 2013 Final Rule and the Inclusive Communities decision cast needless uncertainty on business decision-making, the MBA/trade group letter said. “It is important that HUD amend its Fair Housing regulations to reflect the subsequent standards articulated by the Supreme Court. Doing so will provide businesses with the clarity needed to “sustain a vibrant and dynamic free-enterprise system.”
“The Mortgage Bankers Association and our members strongly support the Fair Housing Act and fair lending,” MBA said in its letter. “We oppose housing discrimination in all its forms. 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.”
Joining MBA in the letter: 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.
