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DOJ, OCC settle redlining allegations
On August 30, the DOJ and the OCC announced coordinated efforts to resolve allegations of lending discrimination by a Georgia-based bank for violations of the Fair Housing Act and ECOA by allegedly redlining predominantly Black and Hispanic neighborhoods in Texas from 2013-2017. The OCC, which referred the matter to DOJ, ordered the bank to pay a $3.3 million civil money penalty. Under the DOJ’s settlement, the bank will invest more than $5.5 million to increase credit opportunities for residents of those neighborhoods.
HUD and FHFA announce fair housing collaboration
On August 12, HUD announced a Memorandum of Understanding (MOU) with FHFA regarding fair housing and fair lending coordination. The MOU—a “first-of-its-kind collaborative agreement”—will expire in December 2025, and is intended to enhance enforcement of the Fair Housing Act and the agencies’ oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. According to HUD, the agencies “anticipate that the MOU will lead to stronger oversight that will help advance vigorous fair housing enforcement that can begin to redress our nation’s history of discriminatory housing practices.”
OCC updates CRA, FHA, and ECOA notices
On August 5, the OCC issued Bulletin 2021-35, which informs national banks, federal savings associations, and federal branches and agencies of foreign banking organizations (collectively, banks) of the names and addresses for notices required by the CRA, ECOA, and for posters under the Fair Housing Act. Banks are required to make the appropriate changes to their notices and posters, as necessary, within 90 days of August 5.
This bulletin rescinds OCC Bulletin 2011-41, “Community Reinvestment Act Notices, Fair Housing Act Posters, Equal Credit Opportunity Act Notices: Guidance.”
FHFA releases policy statement on fair lending
On July 1, FHFA released a policy statement on its commitment to “comprehensive” fair lending oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (collectively, “regulated entities”), in addition to expanding FHFA’s fair lending program. The statement describes FHFA’s position on monitoring and information gathering, supervisory examinations, and administrative enforcement regarding ECOA, the Fair Housing Act, and the Federal Housing Enterprises Financial Safety and Soundness Act. FHFA noted the purpose of the policy statement is “to provide a foundation for possible future interpretations and rulemakings by the agency for its regulated entities.” FHFA also issued an order on fair lending reporting that requires Fannie Mae and Freddie Mac to submit quarterly fair lending reports and data. Comments on the policy statement are due 60 days after publication in the Federal Register.
HUD proposes restoring 2013 discriminatory effects rule
On June 25, HUD published a notice of proposed rulemaking (NPRM) that would rescind the agency’s 2020 disparate impact regulation (2020 Rule) and reinstate the agency’s 2013 rule (2013 Rule). The 2020 Rule (covered by a Buckley Special Alert) was intended to align its disparate impact regulation, adopted in 2013, with the U.S. Supreme Court’s 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. The 2020 Rule included, among other things, a modification of the three-step burden-shifting framework in its 2013 Rule, several new elements that plaintiffs must show to establish that a policy or practice has a “discriminatory effect,” and specific defenses that defendants can assert to refute disparate impact claims. Prior to the effective date of the 2020 Rule, the U.S. District Court for the District of Massachusetts issued a preliminary injunction staying HUD’s implementation and enforcement of the 2020 Rule.
After a period of reconsideration, “HUD is proposing to recodify its previously promulgated rule titled, ‘Implementation of the Fair Housing Act’s Discriminatory Effects Standard’[], which, as of the date of publication of this [NPRM], remains in effect due to the preliminary injunction,” the NPRM stated, adding that HUD “believes the 2013 Rule better states Fair Housing Act jurisprudence and is more consistent with the Fair Housing Act's remedial purposes.” HUD emphasized that the 2013 Rule codified longstanding judicial and agency consensus concerning discriminatory effects law. “Under the 2013 rule, the discriminatory effects framework was straightforward: a policy that had a discriminatory effect on a protected class was unlawful if it did not serve a substantial, legitimate, nondiscriminatory interest or if a less discriminatory alternative could also serve that interest,” HUD said in its press release. “The 2020 rule complicated that analysis by adding new pleading requirements, new proof requirements, and new defenses, all of which made it harder to establish that a policy violates the Fair Housing Act. HUD now proposes to return to the 2013 rule’s straightforward analysis.” Comments on the NPRM are due August 24.
HUD restores AFFH definitions and certifications
On June 10, HUD published an interim final rule (IFR) to restore certain definitions and certifications to its regulations implementing the Fair Housing Act’s requirement to affirmatively further fair housing (AFFH). The IFR also reinstates a process where HUD will provide technical assistance and other support to funding recipients engaged in fair housing planning. The IFR essentially repeals HUD’s 2020 final rule (covered by a Buckley Special Alert), which was intended to align its disparate impact regulation, adopted in 2013, with the U.S. Supreme Court’s 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. As previously covered by InfoBytes, earlier in January, President Biden directed HUD to examine the effects of the final rule while emphasizing that HUD has a “statutory duty to ensure compliance with the Fair Housing Act,” and on April 12, the Office of Management and Budget posted notices (covered by InfoBytes here) announcing a pending proposed rule to reinstate HUD’s Discriminatory Effects Standard related to the 2020 final rule.
Among other things, the IFR “restores the understanding of the AFFH obligation for certain [funding recipients] to the previously established understanding by reinstating legally supportable definitions that are consistent with a meaningful AFFH requirement and certifications that incorporate these definitions.” The IFR also notes that HUD will provide technical assistance and support prior to the IFR’s July 31 effective date, due to a requirement that HUD funding recipients certify compliance with their AFFH duties on an annual basis, as well as HUD’s statutory obligation to ensure that it follows the Fair Housing Act’s AFFH requirements. HUD further recognizes that the 2020 final rule “did not interpret the AFFH mandate in a manner consistent with statutory requirements, HUD’s prior interpretations, or judicial precedent,” adding that the agency also failed to “provide sufficient justification for this substantial departure.”
HUD also announced that it will separately restore guidance and resources for funding recipients to use when conducting fair housing planning until the agency finalizes a new regulation to implement the statutory mandate to AFFH. Comments on the IFR are due July 12.
District Court allows county’s FHA claims to proceed
On June 1, the U.S. District Court for the Northern District of Illinois denied a national bank’s motion to dismiss claims that its allegedly discriminatory mortgage lending practices violated the Fair Housing Act. According to a complaint filed by the County of Cook in Illinois (County), the increase in foreclosures during the relevant time period were proximately caused by the bank’s mortgage practices, and caused the County to incur financial injury, including foreclosure-related and judicial proceeding costs and municipal expenses due to an increase in vacant properties. The bank filed a motion to dismiss, arguing that that the County did not have standing to sue because “the judicial proceedings and other activities associated with the additional foreclosures” actually “yielded a net benefit to the County.” The court disagreed, ruling that all the County had to do was show a reasonable argument that the bank’s lending practices resulted in foreclosures. The bank “does not dispute that the County has properly alleged in its complaint a financial injury sufficient, at least at the pleading stage, to support standing,” the court wrote.
HUD charges mortgage modification service with Fair Housing Act violations
On April 30, HUD announced a Charge of Discrimination against a California-based mortgage modification service (respondents) for allegedly violating the Fair Housing Act by discriminating against Hispanic homeowners. According to HUD, the complainants alleged that the respondents targeted them for illegal or unfair loan modification assistance based on their national origin, and that as a result, “they were diverted from obtaining legitimate assistance” and “were at risk of foreclosure.” Specifically, the respondents allegedly marketed and sold loan modification services to financially distressed California homeowners, the majority of whom were Hispanic. The allegations claim that most of the advertisements were in Spanish or were aired on Spanish-language stations and contained allegedly deceptive information regarding the respondents’ ability to obtain loan modifications, as well as its payment structure. Additionally, the complainants stated that they were discouraged from seeking free loan modification assistance, and were, among other things, (i) charged fees before the respondents completed the promised mortgage modifications; (ii) advised to stop making payments without being informed about the risks involved in not paying their mortgages; (iii) provided inaccurate information about the respondents’ services, including that clients would receive services from an attorney; and (iv) instructed to stop communicating with their lenders and to instead forward all lender communications to the respondents if threatened with foreclosure. The charge will be heard by a United States Administrative Law Judge unless a party elects to have the case heard in federal district court.
9th Circuit will rehear Oakland’s Fair Housing Act case en banc
On April 20, a majority of nonrecused active judges of the U.S. Court of Appeals for the Ninth Circuit vacated a three-judge panel’s 2020 Fair Housing Act (FHA) decision and ordered that the case be reheard en banc. As previously covered by InfoBytes, the City of Oakland sued a national bank alleging violations of the FHA and the California Fair Employment and Housing Act, claiming the bank provided minority borrowers mortgage loans with less favorable terms than similarly situated non-minority borrowers, leading to disproportionate defaults and foreclosures causing (i) decreased property tax revenue; (ii) increases in the city’s expenditures; and (iii) neutralized spending in Oakland’s fair-housing programs. Last year, the three-judge panel affirmed both the district court’s denial of the bank’s motion to dismiss claims for decreased property tax revenue, as well as the court’s dismissal of Oakland’s claims for increased city expenditures. Regarding Oakland’s alleged municipal expenditure injuries, the panel agreed with the district court that Oakland’s complaint failed to account for independent variables that may have contributed or caused such injuries and that those alleged injuries therefore did not satisfy the FHA’s proximate-cause requirement. The panel further held that Oakland’s claims for injunctive and declaratory relief were also subject to the FHA’s proximate-cause requirement, and that on remand, the district court must determine whether Oakland’s allegations satisfied this requirement. The bank filed a petition for panel rehearing and rehearing en banc last October, arguing, among other things, that the panel had “fashioned a looser, FHA-specific proximate-case standard” in conflict with the U.S. Supreme Court’s decisions involving the City of Miami (covered by InfoBytes here). Oakland responded by noting, however, that the panel’s decision is consistent with the City of Miami decisions, and that, among other things, the Supreme Court’s decision did not establish “precise boundaries of proximate cause” but rather asked lower courts to define “the contours of proximate cause under the FHA and decide how that standard applies to the City’s claims for lost property-tax revenue and increased municipal expenses.”
Biden administration to reinstate fair housing rules
On April 12, the Office of Management and Budget posted notices pending regulatory review related to two HUD fair housing rules rescinded under the Trump administration. The first notice announces a pending proposed rule to reinstate HUD’s Discriminatory Effects Standard related to a September 2020 final rule issued by the agency, which amended its interpretation of the Fair Housing Act’s 2013 disparate impact standard. As previously covered by a Buckley Special Alert, the final rule was intended to align HUD’s 2013 Rule with the Supreme Court’s 2015 decision in Texas Department of Housing and Community Affairs et al. v. Inclusive Communities Project, Inc. The final rule included, among other things, a modification of the three-step burden-shifting framework in its 2013 Rule, several new elements that plaintiffs must show to establish that a policy or practice has a “discriminatory effect,” and specific defenses that defendants can assert to refute disparate impact claims. Earlier in January, President Biden directed HUD to examine the effects of the final rule, emphasizing that HUD has a “statutory duty to ensure compliance with the Fair Housing Act.” (Covered by InfoBytes here.)
The second notice relates to a pending interim final rule: Affirmatively Furthering Fair Housing; Restoring Statutory Definitions and Certifications. As previously covered by InfoBytes, last July HUD announced plans to terminate the 2015 version of the Affirmatively Furthering Fair Housing (AFFH) rule, and proposed a new final rule titled “Preserving Community and Neighborhood Choice.” At the time, HUD stated that the AFFH rule was, among other things, overly burdensome, costly, and ineffective.