Bank of America, Quicken Loans, Citi , Wells Fargo, National Association of Realtors call on HUD to hold off on issuing a final Disparate Impact Rule
WASHINGTON, D.C. – Today, leading civil rights groups commended mortgage lenders and industry leaders now advocating for the Department of Housing and Urban Development (HUD) to refrain from issuing a final Disparate Impact rule. These civil rights organizations are also renewing their own push for the agency to pull its dangerous proposal that would gut longstanding civil rights protections for addressing systemic racism in housing. Like those in industry, civil rights groups are citing the unprecedented national attention on racial injustice as reason to halt moving forward on the rule.
Mortgage lender Bank of America sent its letter urging reconsideration to HUD last month while Quicken Loans shared its concerns with the agency last week. Citi, Wells Fargo, and the National Association of Realtors® just recently sent their letters to HUD highlighting legitimate concerns that the agency’s rule would make it more difficult to challenge discrimination forbidden by the Fair Housing Act.
Disparate Impact is a longstanding legal tool necessary for detecting and addressing unlawful discriminatory practices, especially those that lie below the surface. HUD’s proposed rule would greatly impede the ability of people harmed by housing discrimination to prove claims of discrimination. Additional background on the Disparate Impact tool is at the bottom of this document.
“This move by financial services and housing corporations is a paradigm shift. It’s a watershed moment that underscores the point that if we want equality and systemic change, then we need the Disparate Impact tool. We are seeing a recognition that we cannot keep doing business as usual and that real systemic and structural barriers drive inequality in this nation. The racial wealth and homeownership gaps are growing, redlining and housing discrimination are flourishing, our neighborhoods are still segregated, and too many people are left out of the opportunity to access credit and housing opportunities. Our nation has expended an incredible amount of resources creating an unequal society. At a time when housing discrimination has reached record highs, we need stronger enforcement of the Fair Housing Act instead of these continuous, harmful regulatory rollbacks. We join our allies in the lending, insurance and housing industries in requesting that HUD pull back its proposed Disparate Impact rule,” said Lisa Rice, CEO and President at the National Fair Housing Alliance.
“These industry leaders recognize that we can’t backtrack on disparate impact theory at a time when our nation is facing a reckoning over structural racism and inequality. Doing so will only perpetuate racial wealth and homeownership gaps. Our government has historically played a leading role in the segregation of communities by unfairly denying access to federally-insured mortgages based on race. Disparate impact is a critical tool to counteract this legacy by requiring lenders, landlords, insurance companies, and towns to apply their policies equitably to all. HUD’s move shifts the burden of proof in cases of discrimination from the powerful to the vulnerable, undoing decades of legal precedent and diminishing opportunities for hardworking families to build and hold wealth. HUD must reverse course and ensure that we all live in inclusive communities with an ability to share in the nation’s prosperity,” said Nikitra Bailey, Executive Vice President at the Center for Responsible Lending.
“The Fair Housing Act establishes essential protections for all Americans, especially communities of color, who have felt the pain of housing discrimination for decades. Yet, instances of housing discrimination remain underreported, and communities struggle to access the legal resources needed to remedy the reported instances. We join with civil rights and industry leaders in asking that HUD refrain from issuing its rule and ensure it will not undercut the Fair Housing Act,” said Eric Rodriguez, Senior Vice President, Policy and Advocacy, at UnidosUS.
“These mortgage lenders and trade organizations rightfully point out that a robust Disparate Impact standard is necessary to fulfill the promises of the Fair Housing Act. Gutting our ability to dismantle structural racism in housing would have a devastating effect on Black communities,” said Kristen Clarke, President and Executive Director at the Lawyers’ Committee for Civil Rights Under Law.
“Disparate Impact empowers people to take on pernicious forms of discrimination, including based on the color of a person’s skin. Policies that prevent equal opportunity must be challenged, regardless of the aims of those who created them. The impact matters – not just the intent – and that’s exactly what the disparate impact standard is all about. Keeping the standard intact is integral to realizing the promise of the Fair Housing Act and building the strong, inclusive communities all Americans deserve. The U.S. Department of Housing and Urban Development should be working to strengthen tools to eradicate discrimination in housing and to promote fair access. Instead, the Trump Administration is proposing to disable a crucial means of ensuring equal treatment under the law,” said Lisa Cylar Barrett, Director of Policy at the NAACP Legal Defense and Educational Fund, Inc. (LDF).
“We appreciate the lending industry taking this important stand. Low-income communities and communities of color now more than ever need the government to provide them with critical tools to combat discrimination in housing and the insidious harms that result,” said Hilary O. Shelton, Director, NAACP Washington Bureau & Sr. VP for Policy and Advocacy.
“The proposed HUD rule will have a toxic effect on mortgage lenders, and the industry knows that. The Fair Housing Act’s disparate impact doctrine has played a critical role in making fair housing available to all, while at the same time making the lending industry better at evaluating creditworthiness,” said Seema Agnani, Executive Director at National CAPACD.
“Racism and other forms of oppression are frequently hidden from view but no less harmful. The Urban League shares the belief that HUD should refrain from issuing its Disparate Impact Rule to ensure covert discrimination is not given a free pass,” said Marc Morial, President at the National Urban League.
“Disparate Impact is crucial to protecting the civil rights of all people in America. These lenders and industry associations are stepping forward to make common cause with that principle. As a nation, we owe this and future generations the opportunity to have their own American Dream and its accompanying opportunity to build family wealth. Many consumers have the will. It is now incumbent upon those in leadership–both public and private--to demonstrate the equitable way forward,” said Vanita Gupta, president and CEO at the Leadership Conference on Civil and Human Rights.
“Housing discrimination is particularly destructive to a community’s well-being. Uncovering it should not be ‘mission impossible’ as the HUD rule would essentially make it. NCRC commends these mortgage lenders and key industry leaders for asking HUD to rethink the impact of its rule,” said Jesse Van Tol, Chief Executive Officer at the National Community Reinvestment Coalition (NCRC).
"In historically disenfranchised low-income communities and communities of color, homeownership levels have not recovered from the damage caused by the 2008 Housing Crisis, a debilitating event that wiped out 30 years of homeownership and wealth gains among Black and Latino families. We urge HUD to heed the calls from a broad coalition of experts and advocates to stop the rollback of Disparate Impact, a critical tool for preventing housing discrimination,” said Bill Bynum, CEO of Hope Enterprise Corporation / Hope Credit Union (HOPE).
The Disparate Impact tool enables a challenge to policies and practices that may seem neutral on their face but have a disproportionate negative impact on protected classes of people. The courts have recognized that unintentional discrimination can be just as harmful as overt, intentional discrimination and ruled that companies and governments must ensure that their policies are fair.
In 2013, HUD issued a final disparate impact rule, codifying well-settled legal precedent. The rule adopted a widely accepted burden-shifting standard. After a plaintiff shows that a policy or practice has a discriminatory effect, the burden shifts to the defendant to demonstrate how the practice serves a legitimate business need. If the defendant meets this burden, the plaintiff may still prevail if they can show that the company’s justified non-discriminatory goal could be achieved by a less discriminatory alternative. In 2015, the United States Supreme Court issued a decision, in Texas Dept. Of Housing and Community Affairs v. Inclusive Communities Project, Inc., recognizing that Disparate Impact claims are cognizable under the Fair Housing Act.
The proposed HUD rule would obstruct Disparate Impact claims by requiring additional burdensome steps to prove unlawful discrimination allegations. The proposed rule also creates a safe harbor for those who design and use algorithms. Algorithms are “hidden boxes” which make it extremely difficult to detect and address bias in the algorithmic system. Artificial intelligence and algorithms have been exposed as problematic in various sectors, including the lending, education, health, and criminal justice systems.
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