Posts tagged ‘Fair Housing Act’

HUD Prohibits Gender Identity and Sexual Orientation-based Discrimination

In one of the first examples of the dramatic impact the Biden Administration will have on housing policy, The Department of Housing and Urban Development (HUD) announced Friday that it was interpreting the Fair Housing Act as prohibiting discrimination against individuals on the basis of sexual orientation and gender identity. The announcement, which is an outgrowth of Executive Order 139.88, means that we will soon start seeing high profile enforcement actions based on alleged sexual orientation discrimination.

In one of the most important cases from its last term, the Supreme Court ruled that Title VII of the Civil Rights Act, which prohibits discrimination in employment on the basis sex, also applied to individuals discriminated against on the basis of their sexual oritentation or gender identity. In the memo released on Friday, HUD’s Office of Fair Housing and Equal Opportunity announced that the ruling extends to discrimination under the Fair Housing Act, which of course bars discrimination on the basis of race or sex. Effective immediately, HUD will “accept for filing and investigate all complaints of sex discrimination, including on the basis of gender identity or sexual oritentation.” The new announcement is intended to signal that this prohibition is going to be aggressively interpreted and enforced by HUD.

On a practical level, lenders in New York should already have policies which prohibit gender-based discrimination as a matter of state law. But now that HUD has issued this ruling, credit unions that lend in New York and in states which don’t already ban this type of discrimination should review their existing policies.

February 16, 2021 at 9:40 am Leave a comment

Does Your Lending Policy Discriminate Against The Disabled?  

That’s the question that Bank of America (BOA) had to grapple with in recent years as it was investigated by Federal prosecutors over allegations that its policies regarding guardianships and conservatorships had the effect of discriminating against disabled individuals in violation of federal law.  It’s one of the most unique cases I’ve seen in several years and underscores the importance of understanding the impact your credit union’s policies will have on individuals subject to guardianships and even Power of Attorneys.

Between 2010 through 2017 BOA had a nationwide policy of refusing to give first lien mortgages or home equity lines of credit to persons who were subject to conservatorships or guardianships.  Specifically, for more than half of the last decade, BOA had a written policy that prohibited making first lien mortgage loans to adults represented by legal guardians or conservators.  It also had a policy that prohibited lending to adults seeking home equity lines of credit where the property to secure the loan was owned by the guardian or conservator.  BOA defined a conservatorship as “created by a court order that appoints a person or entity (the conservator) to manage the financial affairs and/or the personal care of a mentally and/or physically incapacitated adult (the conservatee).” The policies also stated that guardians and conservators may be appointed to manage the affairs of individuals “ruled incompetent.”

Needless to say, BOA is a pretty sophisticated operation and I’m assuming that its policies were designed in part to prevent financial abuse.  The problem is of course that a policy such as this will have the effect of denying loans to otherwise qualified mentally or physically disabled individuals who are otherwise qualified applicants.  This violates section 42 U.S.C. § 3604(f)(2) of the Fair Housing Act.  It also runs afoul of New York’s Fair Lending Laws, which were not at issue in this case.

The bank changed its policy three years ago and denied any wrongdoing in its settlement agreement.

New York Primary Results Lead to an Even More Progressive State Legislature

It took more than a month to confirm, but the “AOC Effect” is having a particularly pronounced impact on the State Legislature.

In perhaps the most striking example of the ideological and generational shift which is taking place, 36 year old Emily Gallagher defeated Brooklyn Assemblyman Joseph Lentol who was part of a wave of young Democrats elected to the Assembly in 1973 as the burgeoning Watergate scandal ended Republican control of the State Assembly.  You can bet that lending policies and procedures will be under even greater scrutiny in the years to come.

July 27, 2020 at 9:53 am Leave a comment

The Day of the Legal Dud

The big news this morning is that there really is no big news this morning.

Yesterday the Supreme Court upheld the use of “disparate impact analysis” in housing discrimination cases. So, lending criteria that has the effect of discriminating against minorities continues to be illegal regardless of your credit union’s intentions. The State legislature left town without addressing what to do about Uber and other transportation companies. And, of course, the Court upheld a key provision of Obamacare.

To understand why no news is big news today, let me describe what could have happened. Everyone agrees that the Fair Housing Act outlaws intentional discrimination on the basis of a protected characteristic. But does it outlaw practices that have a disparate impact on minorities even when such practices are not motivated by a discriminatory intent? You won’t find any disparate impact language in the Fair Housing Act statute. Nevertheless, nine federal circuit courts have interpreted the statute as authorizing disparate impact lawsuits. Yesterday, a 5-4 majority of the Supreme Court sided with those circuits and held that plaintiffs who can demonstrate a disparate impact can bring anti-discrimination lawsuits. In a decision written by Justice Kennedy, the Court concluded that the precedent established by lower courts, as well as the similarity between the FHA and other anti-discrimination statutes that outlaw disparate impact policies demonstrated that Congressional intent was to authorize these lawsuits. As many commentators have pointed out this morning, the ruling will embolden the CFPB and HUD to continue to bring enforcement actions.

As for the State Legislature, there are many issues left to be taken up another day. For example, the Legislature is sure to continue to consider insurance requirements that should be imposed on transportation network companies like Uber and Lyft seeking to operate statewide. In addition, although progress was made this year, we will continue to push for legislation permitting the Comptroller to deposit state funds in credit unions. Finally, Senator Savino did a great job this year in highlighting subprime auto lending practices at dealerships and I expect that this issue will continue to be scrutinized.

As for Obamacare, if you are a credit union planning to cover your employees through a state exchange, yesterday’s decision by the Court gives you the green light to go ahead and do so. A decision against Obamacare would have ended the provision of subsidies in states where health care exchanges were set up by the federal government. I’m with the President on this one, it’s time to move on.

June 26, 2015 at 8:38 am 1 comment

Two Things You Won’t Be Hearing About Today

You won’t be hearing about a major Supreme Court decision regarding whether disparate impact analysis applies to the Fair Housing Act.  As you all know, as a general rule of thumb lenders can be on the hook for intentional discrimination, as well as policies that have a disparate impact on minority groups.  In a case called Township of Mt. Holly v. Mt. Holly Gardens Citizens in Action, the Court was going to address head-on whether or not housing policies that have a disproportionate and negative impact on minority groups absent any showing of discriminatory intent violate the Fair Housing Act.  Even though the case dealt with redevelopment plans that long time residents argued would deprive residents of the overwhelmingly minority community access to affordable housing, the case had huge implications for lenders as well as HUD’s ability to enforce lending policies under the Fair Housing Act.  Consequently, the American Bankers’ Association and others weighed in with an amicus brief arguing not only that disparate impact analysis can’t be applied under the Fair Housing Act, but also that there is no right of private citizens to sue under the Act.

I have to be honest with you, I feel like the kid who runs down to the Christmas tree on Christmas morning only to find that the one present he really wanted wasn’t there.  Last night, the Mt. Holly Town Board voted to settle the law suit making the case moot.  (http://www.philly.com/philly/news/20131114_Mount_Holly_Gardens_discrimination_dispute_settled.html)  The decision comes after the town voted in candidates supporting a settlement.  In other words, the legislative process trumped the judicial one.  What a concept.

This marks the second year in a row that litigation involving disparate impact has been yanked from the Supreme Court’s agenda at the last second.  But sooner or later, we are going to have to get this important issue resolved once and for all.

Another thing you won’t be hearing about today is equivocation on the part of Janet Yellen about the need to continue the FED’s $85 billion monthly bond buying binge.  Although certain members of the FED have grumbled for months about the need to start “tapering” down the program, in her prepared testimony (http://www.federalreserve.gov/newsevents/testimony/yellen20131114a.htm) released yesterday evening in advance of today’s nomination hearing to be the next FED Chairman she argues that unemployment is still too high and that inflation continues to run below expectations and “is expected to continue to do so for some time.”  Against this backdrop, she argues that:

 “for these reasons, the Federal Reserve is using its monetary tools to promote a more robust recovery.  A strong recovery will ultimately enable the FED to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases.  I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.”

Translation, the economy is still too weak to conclude that the value of monetary easing is outweighed by the potential inflationary dangers it poses to the economy.  This is stronger language than was ever used by Chairman Bernanke.  If Ms. Yellen’s live testimony is as straightforward as her written testimony, expect to see a big day on Wall Street and a rally in the bond markets.

On that note, have a good day.

November 14, 2013 at 8:06 am Leave a comment

Can A Qualified Mortgage Violate the Law?

NCUA announced this week that it will be hosting a Fair Housing Webinar on April 4.  It has also come out with an industry letter addressing the issue.  Needless to say, housing policy is getting a lot of scrutiny and here’s a reason why.  The first thing any compliance officer learns about lending is that credit unions and banks are legally prohibited not only from making loans that intentionally discriminate against an individual, but also from implementing policies and practices that have the effect of discriminating against a person on an illegal basis, such as the person’s sex, race  or age.

The interesting thing is that a plain reading of the Fair Housing Act (FHA) does not speak of outlawing policies that have the unintentional effect of disproportionately impacting a protected group.  HUD, however, has interpreted the statute this way and by and large the courts have agreed.  So why in February did it promulgate regulations that it says simply codifies existing disparate impact regulations?  In other words, HUD proposed a regulation not to change existing law but to summarize existing law, which it argues, is well settled.  Now, as I like to say, lawyers are paid to be paranoids, but, as Henry Kissinger liked to say even paranoids have enemies.  Something fishy is going on here.

There’s been growing legal analysis lately of a very intriguing question:  can a bank or credit union have a policy of only providing qualified mortgages under the Dodd-Frank Act, which are supposed to be given a “safe harbor” from legal action and still violate HUD’s interpretation of the FHA.  The answer, judging by HUD’s response in the preamble to its regulations, seems to be maybe.  Specifically, during the comment period to HUD’s new regulation, lenders complying with the new Dodd-Frank mortgage requirements questioned whether they will face increased liability as a result of HUD’s interpretation of disparate impact regulations.  The working assumption is that a lending institution that decides simply to provide qualified mortgages may disproportionately impact minority groups that are less likely to meet the stricter underwriting standards.

HUD’s response is not reassuring.  HUD reiterated that a lender is free to defend any allegations of illegal discriminatory effects by meeting its burden of proof demonstrating that there is a legally sufficient justification for its underwriting standards.  It goes on to repeatedly state that nothing has really changed, although it does think that lenders should review their internal lending policies explaining that it hopes its new rule will encourage lenders, who already have analyzed the impact that their policies have on lending decisions, to “review those analyses in light of its new regulations.”

Here’s the problem.  Lenders meeting qualified mortgage standards are not supposed to have a burden of proof imposed on them.  By pointing out lenders are free to meet their burden of proof to demonstrate why a lending policy is legally sufficient, HUD seems to be suggesting that a qualified mortgage policy will still have to be justified where borrowers can show that it has a discriminatory impact on mortgage lending.  So much for the safe harbor.

To be fair, some people argue that this analysis is nonsense.  This is no different than existing law, they argue, where lenders have always had the burden of justifying policies that do have a negative impact on minority groups.  Plus, if Fannie and Freddie are willing to buy a mortgage, it is going to be considered a qualified mortgage, so what’s the big deal.  First, prior to Dodd-Frank, there has never been a federally mandated underwriting standard intended to apply to all mortgages and no lending institution should strive to comply with those standards only to be sued for meeting them.

Second, don’t be so sure that Fannie and Freddie’s underwriting standards won’t face legal scrutiny.  HUD has moved in the past to work with the GSEs when it felt their policies were hurting minorities and lending advocates would presumably be more than willing to do so in the future.

March 21, 2013 at 8:53 am Leave a comment


Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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