Mortgage

HUD signals changes could be coming to disparate impact rule

Invites comment on whether HUD rule is “consistent” with Supreme Court ruling

Changes could be on the way for the Department of Housing and Urban Development’s disparate impact rule, a rule enacted by HUD during the Obama administration and used as a way to enforce the Fair Housing Act.

Under HUD’s rule, lenders, landlords, and other housing providers can be held liable for discrimination against protected classes even if it was not their intent to discriminate.

The use of disparate impact was challenged all the way up to the Supreme Court, which ruled in 2015 in favor of disparate impact.

The 2015 ruling by the Supreme Court upheld and established that the Fair Housing Act allows lawsuits based on disparate impact, meaning a law or practice can be determined to have a discriminatory effect even if it wasn’t based on a discriminatory purpose.

Basically, the ruling establishes that a lender’s practices can be deemed as discriminatory in the eyes of the law (specifically the Fair Housing Act) even if the lender didn’t purposefully discriminate.

And while the Supreme Court upheld the use of disparate impact as a legal means to establish liability for discriminatory actions, the court’s decision did not specifically rule on HUD’s policy.

Now, HUD is preparing to ask the public to comment on whether its rule (which can be read in full here) is “consistent” with the Supreme Court's decision (which can be read in full here).

HUD announced Thursday that it will soon open up a public comment period on its disparate impact rule and how it relates to the Supreme Court ruling.

Disparate impact and its effect have come under fire from the housing industry, and even from HUD Secretary Ben Carson.

Late last year, the Trump administration, via the Department of the Treasury, called on HUD to reconsider how it used the disparate impact rule.

In a well-publicized op-ed published in The Washington Times in 2015, Carson said that the Supreme Court ruling on disparate impact and the Obama administration’s Affirmatively Furthering Fair Housing rule are “government-engineered attempts to legislate racial equality create consequences that often make matters worse.”

HUD already moved to delay the AFFH rule, which requires cities and towns that receive federal funding to examine local housing patterns for racial bias and design a plan to address any measurable bias.

That move led to Carson and HUD being sued by a number of fair housing advocates.

And now, HUD is signaling that changes may be coming to the disparate impact rule.

“HUD remains committed to making sure housing-related policies and practices treat people fairly,” HUD Secretary Ben Carson said in a statement. “We will always challenge any practice that discriminates against people the law protects."

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