WASHINGTON, D.C. – The Center for Responsible Lending (CRL), along with affiliated nonprofits, Self-Help Credit Union and Self-Help Federal Credit Union, today released a comment letter supporting a proposed rule from the U.S. Department of Housing and Urban Development (HUD) to restore the “disparate impact” standard, a crucial legal tool used to identify and eliminate discrimination. Full text of the comment letter is linked here.

“Discrimination continues to plague our housing market. It denies economic opportunities to Black and Latino communities and other communities of color, as well as women, people with disabilities, and the LGBTQ community,” said Aracely Panameño, Center for Responsible Lending director of Latino affairs. “The Biden Administration and HUD Secretary Marcia Fudge have proposed a rule that would bolster the fight against housing discrimination. It is our hope that this proposal will be finalized as written.”

The proposed rule, if finalized, would rescind a harmful 2020 rule from HUD, which a judge has stayed. It would also reinstate HUD’s 2013 rule, which – as described in CRL’s comment letter – “better states Fair Housing Act jurisprudence and is more consistent with the Act’s remedial purposes.”

Highlights of the comment letter from CRL, Self-Help Credit Union, and Self-Help Federal Credit Union:

  • “It is critical that HUD proceed with reinstituting a meaningful disparate impact standard and vigorously enforce our nation’s fair housing laws.”
  • “The 2013 Rule properly codified the disparate impact standard that has prevailed in the courts and has been used by regulators, including HUD, for decades.”
  • “The 2020 Rule would have placed insurmountable barriers for a potential complainant to make it past the pleading stage when bringing a claim under disparate impact theory. HUD’s 2020 Rule also introduced confusing and harmful defenses, such as the ‘outcome prediction’ defense that would obfuscate discrimination in lender models and algorithmic systems.”
  • “The proposed rule appropriately returns the definition of ‘discriminatory effect’ that was eliminated by the 2020 Rule, including by acknowledging ‘perpetuation of segregation’ as a recognized type of discriminatory effect. The proposed rule also recodifies that actions that could predictably result in a disparate impact on a group of persons are prohibited by the Fair Housing Act.”
  • “Today’s racial wealth gap and lending disparities are in large part the result of decades of government policies and practices that enabled the redlining of communities of color for most of the 20th century.”
  • “While discrimination and its ill effects continue to the present day, much of it has become covert and harder to pinpoint. Disparate impact theory is intended to root out discriminatory policies and practices that are difficult (and sometimes impossible) to prove via a finding of intentional discrimination.”
  • “Disparate impact, far from imposing excessive burdens and encouraging abusive litigation, has introduced needed innovation in mortgage and insurance markets, eliminating barriers to homeownership and encouraging more rigorous and accurate assessment of risk. Indeed, an analysis of ‘less discriminatory alternatives’ encourages innovation. It does not require lenders to ignore relevant and material underwriting criteria, but rather to avoid factors that disadvantage protected classes unnecessarily."
  • “This disparate impact process… has resulted in a fair loan process for all borrowers and a more profitable one for banks. Some of those who historically have been denied loans at a disproportionate rate now have greater access. And not only have lenders fully retained their ability to identify and respond to risk, they have also expanded their customer base. This offers enormous potential to increase profit.”
  • “For more than 45 years, disparate impact theory has been a crucial legal tool to fight discrimination and ensure equal housing opportunity. CRL, Self-Help Credit Union, and Self-Help Federal Credit Union strongly support HUD’s proposed rule to rescind the 2020 Rule and reinstate the 2013 Rule.”

Additional Background

The Fair Housing Act of 1968 prohibits the use of policies that seem neutral on their face but have an unjustified discriminatory effect. This stems from a recognition that this discrimination may not be as obvious as overt discrimination but is no less invidious. Courts have permitted disparate impact claims for over 45 years.

In 2013, HUD, under President Obama, issued a strong disparate impact rule, grounded in decades of legal precedent. That rule was titled Implementation of the Fair Housing Act’s Discriminatory Effects Standard.

In 2015, the U.S. Supreme Court affirmed the use of disparate impact under the Fair Housing Act in its ruling in Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc. The Court made clear that disparate impact theory is necessary to fulfill “the Fair Housing Act’s continuing role in moving the nation toward a more integrated society.”

Late last year, President Trump’s Administration issued a final rule, titled HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard, which would have decimated the disparate impact standard in housing. Civil rights groups and elected officials as well as mortgage industry leaders – including Bank of America, Citigroup, Quicken Loans, and the National Association of Realtors – urged the Administration to not issue the final rule. They expressed concern that the rule would facilitate housing discrimination and called for reexamination of the rule in light of ongoing national discussions around structural racism. This 2020 rule has been on hold, for now, due to a nationwide preliminary injunction issued by a federal judge.

In January of this year, President Biden – as part of a wide-ranging agenda to advance racial equity – issued a memorandum acknowledging the federal government’s role in creating and perpetuating discriminatory housing policies, and directing HUD to reassess the Trump-era disparate impact rule.

In June, the Biden Administration proposed its disparate impact rule, entitled Restoring HUD’s Discriminatory Effects Standard, to reinstate the power of the 2013 rule to halt and prevent housing discrimination.


Press Contact: matthew.kravitz@responsiblelending.org

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