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Join our expert panelists to learn which best marketing practices will help you get to your customer quickly with your best offer – and win their business for another loan term.

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HUD floating proposal that would limit Fair Housing claims

Rule changes would make it harder to prosecute lenders for housing discrimination

The Department of Housing and Urban Development is floating a proposal that would make it harder to prosecute lenders for alleged incidents of housing discrimination under the Fair Housing Act.

The move is yet another step from the Trump administration to roll back an Obama-era practice of using the Fair Housing Act to pursue lenders for housing discrimination. In effect, the policy left lenders with little recourse to defend themselves, forcing them to cough up hefty fines for minor infractions or face prosecution from the Department of Justice.

Now, after so many lenders cried foul, policymakers are taking steps to revise the practice.

According to a copy of the proposal published by Politico, the updated guidelines revise the current loose, three-step threshold for Fair Housing violations and impose a specific, five-step approach that would require regulators to prove intentional discrimination on the lender’s behalf.

The proposal revises the manner in which HUD will weed out housing discrimination by employing the disparate impact rule, a legal term defined by the use of statistics to hold businesses accountable for unintentional discrimination.

Under the suggested revision, the plaintiffs would have to show that the practice in question is “arbitrary, artificial and unnecessary” and that it adversely affects more than just one member of a protected class.

Importantly, they also have to show that the practice has a significant disparate impact. It also grants lenders greater room to defend themselves against claims.

HUD said the proposal updates its interpretation of disparate impact to better reflect a 2015 Supreme Court ruling that determined that liability for such claims must be limited.

According to Politico, HUD submitted the proposal this week to Congress, where it will be subject to a 15-day review and then published in the Federal Register and opened to the public for a 60-day comment period.

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