Hello, LOs!
Mortgage industry trade groups had some suggestions for the Department of Housing and Urban Development this week, as the agency moves to reinstate its disparate impact rule.
HUD announced its plans to reinstate the 2013 rule in June. Over the years, the rule has weathered legal challenges, including a successful lawsuit brought by two homeowner insurer groups, as well as a major rewrite last year.
Groups including the Mortgage Bankers Association, the American Bankers Association, the Consumer Bankers Association, the Independent Community Bankers of America, the Housing Policy Council and the Community Home Lenders Association all would like HUD to make some tweaks before the rule is implemented.
All of the industry groups pointed to a 2015 Supreme Court ruling, a 5-4 decision which found that the Fair Housing Act allows for disparate impact claims, but introduced a major caveat.
It found that showing a statistical disparity is not sufficient for a claim to be successful.
First, plaintiffs in disparate impact cases must draw an explicit causal connection between a practice and a statistical disparity. The defendant then has the opportunity to show that the practice was necessary to achieve a legitimate, non-discriminatory practice. If the defendant can't prove that, and only if the plaintiff can show there is an alternate business practice that is less-discriminatory, the claim can prevail.
Yet HUD's proposed reinstatement of its disparate impact rule did not include those higher thresholds for claims.
The CHLA argued in its letter to HUD that those safeguards are important for smaller independent mortgage banks that "don't have the economies of scale to respond to a proliferation of lawsuits."
The MBA wrote that the 2015 ruling is the "law of the land," and HUD's rule should be aligned with it.
"Recodifying the 2013 Rule would reinstate a standard that predates and is inconsistent with binding Supreme Court precedent," the MBA wrote. "Each new administration's initiation of rule changes creates uncertainty for industry members and fair housing advocates alike, and undermines the fundamental statutory goal of expanding credit opportunity and availability."
Of course, HUD doesn't have to make any of the suggested changes. But it will need to explain its response to meaningful commentary it receives in the introduction of the final rule.
Where do you fall in the debate over using statistics to prove discrimination? Send a note to gkromrei@housingwire.com
Georgia Kromrei
Senior Mortgage Reporter, HousingWire
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