The House Financial Services Subcommittee on Housing and Community Opportunity on Wednesday considered House Resolution (H.R.) 476, the Housing Fairness Act of 2009, which would authorize $20m annually for a nationwide study of discrimination in housing and mortgage lending. Sponsored by Rep. Al Green (D-TX) and introduced on Jan. 13, 2009, HR 476 would direct the US Department of Housing and Urban Development (HUD) to conduct a nationwide testing program to document differences in treatment of consumers looking to rent or purchase housing or refinance an existing mortgage loan. HUD’s review would measure patterns of adverse treatment based on race, religion, gender, familial status, disability or national origin across the housing and mortgage lending markets. HUD would also be required to report to Congress both biennially – regarding the results of testing – and annually – regarding the calls received by the Fair Housing Administration‘s hotline. The bill would authorize the HUD secretary or any state or local government or agency, public or private nonprofit organization or institution to pursue investigation or enforcement action to resolve any discrimination uncovered by the test. The bill allocates $20m in fiscal year 2010 and each fiscal year thereafter for the execution of the testing process. The House subcommittee, in its hearing Wednesday, heard from industry witnesses including HUD assistant secretary for fair housing and equal opportunity John Trasviña, who commented on the occurrence of lending discrimination in complaints received by HUD. According to Trasviña, about 5% of housing discrimination cases filed with HUD and its state and local agency counterparts involve lending discrimination. Around 30% of these cases demonstrate “cause to believe discrimination occurred,” resulting in $2.08m in compensation or assistance distributed last year alone. “HUD has not always fulfilled its obligation to ensure that our money is spent in ways that affirmatively further fair housing,” he said in prepared testimony (download here). “In this new day, however, there is a Department-wide commitment to incorporate our mandate to affirmatively furthering fair housing into all of our work so that we can fulfill our shared goal of truly integrated and balanced living patterns.” But HUD’s commitment might not be enough, as the National Fair Housing Alliance president and CEO Shanna Smith said in prepared remarks (download here) that fair housing organizations must have adequate resources to hire fully trained and qualified staff and lending testers, and conduct complicated lending and foreclosure scam tests. The move for a nationwide program for testing discrimination in housing and mortgage lending comes at a time when a new unit in the Department of Justice (DOJ) Civil Rights Division is already investigating 38 allegations of reverse redlining, the practice where economically disadvantaged neighborhoods are targeted for more expensive and risky mortgage products. The unit might encounter difficulty making reverse redlining charges stick, however, as a recent suit filed by the City of Baltimore against Wells Fargo (WFC) was thrown-out weeks ago. The judge’s decision to dismiss the case comes as another foreclosure-related lawsuit is underway. According to the claims of former employees, Wells used reverse redlining in economically disadvantaged neighborhoods across Memphis and surrounding Shelby County. Write to Diana Golobay. Disclaimer: The author holds no relevant investment positions.