Disparate impact makes a comeback

According to the 2013 rule, lenders could be held liable for discrimination, even if it was not their intent to discriminate.

Was this newsletter forwarded to you? Sign up here. Good afternoon —   Did you miss me? I took off last week and enjoyed nature's beauty in the mountains. I bet you didn't even notice — especially with all the news we covered! Aside from the FHFA drama, one very consequential piece of news was around disparate impact. On Friday, HUD published a proposal that would reinstate its 2013 discriminatory effects rule, throwing out the disparate impact rule put into place under the Trump administration.   According to the 2013 rule, lenders could be held liable for discrimination against protected classes, even if it was not their intent to discriminate. The rule was vigorously contested all the way to the Supreme Court, which upheld it in 2015.   That changed with the Trump administration, which issued a proposed rule in 2020 requiring regulators to prove intentional discrimination by lenders, and said that its rule was the correct interpretation of the Court's finding. HUD Secretary Marcia Fudge holds a different view.    "We must acknowledge that discrimination in housing continues today and that individuals, including people of color and those with disabilities, continue to be denied equal access to rental housing and homeownership," Fudge said. "It is a new day at HUD — and our Department is working to lift barriers to housing and promote diverse, inclusive communities across the country."   Trump's version of the rule was quickly put under injunction and never took effect, so in theory lenders shouldn't have to pivot any of their policies or procedures with the most recent update. But business is not carried out in theory, and it's possible some lenders relaxed their compliance around disparate impact. That would be a mistake. As the Biden administration has made clear again and again, it is serious about regulation. A new day at HUD indeed.

Until tomorrow —

 

Sarah Wheeler

HousingWire Editor in Chief

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