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  • DOJ, national bank settle Fair Housing Act discrimination claims

    Courts

    On July 23, the DOJ and U.S. Attorney’s Office for the Eastern District of New York filed a complaint and proposed settlement agreement with a national bank to settle charges that the bank engaged in a pattern or practice of discrimination against people with disabilities in violation of the Fair Housing Act. According to the complaint, policies put in place by the bank beginning in January 2010 allegedly denied mortgage and home equity loans to adults with disabilities living under guardianships or conservatorships. The complaint further claims that the bank, in certain circumstances, denied mortgage loans to applicants who “made explicit requests” for the bank to “reconsider its denial” and accept court orders specifically permitting the guardian or conservator to act on behalf of the disabled individual. These policies were changed in 2016 for mortgage loans and in 2017 for home equity loans, the DOJ noted. The bank, however, denied the allegations, asserting that it did not, and does not, unlawfully discriminate on any prohibited basis, and that during the time period in question, it made “mortgage loans to persons with handicaps and disabilities without restrictions, including some adult applicants who had legal guardians or conservatorships.” Under the terms of the proposed settlement, the bank has agreed to pay $4,000 to each affected loan applicant, with a total expected payout of approximately $300,000. The bank is also required to (i) maintain the revised loan underwriting policies; (ii) train employees on the new policies; and (iii) monitor loan processing and underwriting activities to ensure Fair Housing Act compliance.

    Courts Fair Lending DOJ Fair Housing Act Settlement

  • HUD unveils new rule to replace 2015 AFFH rule

    Agency Rule-Making & Guidance

    On July 23, HUD announced plans to ultimately terminate the 2015 version of the Affirmatively Furthering Fair Housing (AFFH) rule, while proposing a new final rule titled “Preserving Community and Neighborhood Choice.” The new final rule includes a detailed history of the expansion of the AFFH concept and details concerns with the 2015 rule. According to HUD, the AFFH rule is, among other things, overly burdensome, costly, and ineffective. However, several senators argued against HUD’s originally proposed replacement (covered by InfoBytes here), contending that the proposed rule would reverse efforts to make access to housing fair and equitable and “relies on the faulty premise that simply increasing housing supply can address the problems of housing discrimination and segregation.” HUD stated that after reviewing comments on the proposed changes, the agency ultimately determined them to be “unworkable and ultimately a waste of time for localities to comply with,” and noted that it had instead established programs to bring capital into underserved communities where affordable housing is present but opportunities are not. The new final rule broadly defines “fair housing” to be “housing that, among other attributes, is affordable, safe, decent, free of unlawful discrimination, and accessible under civil rights laws,” and defines “affirmatively furthering fair housing” as “any action rationally related to promoting” any of the attributes of fair housing. Specifically, a grantee’s certification that it has affirmatively furthered fair housing would be deemed sufficient provided it proposed taking action to further fair housing policy during the relevant period. The new final rule will become effective 30 days after publication in the Federal Register.

    Agency Rule-Making & Guidance HUD Fair Housing Fair Lending

  • Senators question OCC on fair lending

    Federal Issues

    On July 20, a group of eighteen senators wrote to the acting Comptroller of the OCC, Brian Brooks, regarding reports that senior officials at the agency “have undermined OCC examiners’ efforts to investigate and pursue violations of civil rights laws,” including the Fair Housing Act (FHA) and ECOA. The letter cites to reports of at least three instances where examiners allegedly found discriminatory lending patterns present, yet OCC leadership failed to pursue action against the institutions.

    The senators argue that failing to pursue fair lending violations “not only harms borrowers and their communities, but also undermines meaningful bank evaluations under the Community Reinvestment Act (CRA).” The senators list a series of questions regarding the OCC’s supervision of the FHA and ECOA since 2017, including information covering the number of fair lending citations that the OCC has issued, as well the number of fair lending referrals the OCC has made to the DOJ. The letter sets a response deadline of July 31.

    Federal Issues OCC Fair Lending Fair Housing Act ECOA U.S. Senate Congressional Inquiry

  • Special Alert: CFPB takes first-ever agency redlining action against nonbank lender

    Federal Issues

    On July 15, the Consumer Financial Protection Bureau filed a complaint against a Chicago-based nonbank mortgage company alleging fair lending violations predicated, in part, on statements made by the company’s owner and other employees during radio shows and podcasts from 2014 through 2017. The complaint, filed in federal court in Illinois, marks the first instance in which a federal regulator has taken a public enforcement action against a nondepository institution based on allegations of redlining.  

    According to the CFPB, the mortgage company violated the Equal Credit Opportunity Act and the Consumer Financial Protection Act by engaging in discriminatory marketing and applicant outreach practices that allegedly:

    Federal Issues CFPB Enforcement Mortgages Fair Lending ECOA CFPA Nonbank Redlining Special Alerts

  • DOJ settles with Maryland car dealership for ECOA violations

    Federal Issues

    On July 2, the DOJ announced a settlement with a Maryland used car dealership and its owner and manager (collectively, “defendants”) resolving allegations that the defendants violated ECOA by offering terms of credit based on race to consumers seeking to purchase and finance used cars. As previously covered by InfoBytes, in September 2019, the DOJ announced it filed a lawsuit in the U.S. District Court for the District of Maryland alleging that between September 2017 and April 2018, compliance testing done by the DOJ concluded that the defendants’ “actions, policies, and practices discriminate against applicants on the basis of race with respect to credit transactions. . .by offering more favorable terms to white testers than to African American testers with similar credit characteristics.” Specifically, the complaint alleged that African American testers were, among other things, (i) told they needed higher down payment amounts than white testers for the same car; (ii) quoted higher bi-weekly payments for “buy here, pay here” financing than white testers for the same car; and (iii) not offered to fund down payments in two installments, as compared to white testers.  

    The consent order, which is subject to court approval and does not assess a monetary penalty, requires the dealership to, among other things, (i) develop written policies designed to prevent discrimination and ensure compliance with ECOA, including standardizing procedures for all credit applicants to reduce individual discretion in determining terms and conditions of credit; (ii) post and display a non-discrimination notice; (iii) attend ECOA training; and (iv) engage in on-going compliance monitoring and recordkeeping and reporting requirements with the DOJ.

    Federal Issues DOJ ECOA Auto Finance Fair Lending Enforcement

  • Lawmakers urge HUD and FHFA to amend forbearance policies that reduce access to mortgage credit

    Federal Issues

    On June 25, Chairwoman of the House Financial Services Committee, Maxine Waters (D-CA), Chairman of the Subcommittee on Housing, Community Development and Insurance, Wm. Lacy Clay (D-MO), and Congressman Juan Vargas (D-CA) sent a letter to HUD and FHFA calling for amendments to policies which penalize loans that go into forbearance prior to being insured by the Federal Housing Administration (FHA) or purchased by Fannie Mae or Freddie Mac (GSEs). According to the lawmakers, policies put into place prior to the Covid-19 pandemic by HUD and FHFA prohibited loans in forbearance from FHA endorsement or from being purchased by the GSEs. While the agencies amended the policies to allow for FHA insurance and GSE purchases due to the current economic crisis (covered by InfoBytes here and here), the lawmakers claim that lenders are required to pay “significant fees” and “increased costs” for these loans, which results in lenders (i) retaining mortgages that they had no intention, or may not have the capacity to maintain; (ii) paying a steep penalty to the GSEs; or (iii) agreeing to retain additional risk in the case of FHA. As a result, lenders have started limiting loans and access to credit or requiring “credit overlays” that are “disproportionately affecting borrowers of color and other underserved borrowers.” The lawmakers also assert that if a lender retains a loan to avoid a penalty, the loan does not become federally-backed and is consequently ineligible for protections afforded by the CARES Act and other federal regulations. The lawmakers ask that the agencies amend their policies to instead “spread the costs associated with those risks across a broader single-family portfolio,” which will lead to “near-negligible costs” on individual loans and “appropriately balance the need to manage risks to the taxpayer while serving [the] agencies’ missions of promoting access to credit.”

    Federal Issues HUD FHFA Mortgages Mortgage Insurance GSE Fair Lending Fannie Mae Freddie Mac Covid-19

  • HUD works with online search platform to improve FHA compliance

    Federal Issues

    On June 11, HUD announced that it worked with an online search platform to better align the platform’s advertising policies with the requirements of the Fair Housing Act (Act)—specifically, the Act’s prohibition on discriminatory advertising in connection with the sale, rental, or financing of housing, with HUD noting that the prohibition “includes restricting who sees housing-related ads on these bases.” HUD states that the online search platform adopted a policy that prohibits “advertisers from engaging in certain discriminatory practices when placing housing-related ads using [the platform]’s advertising services” and has indicated that it will continue to work with HUD to uphold the principles of the Act in the online and targeted advertising space. The announcement notes that HUD will continue to review online advertising platforms to ensure compliance with the Act.

    Federal Issues Fair Lending Fair Housing Act Mortgages Advertisement HUD

  • CFPB status report provides Section 1071 implementation updates

    Courts

    On May 26, the CFPB filed its first status report in the U.S. District Court for the Northern District of California as required under a stipulated settlement reached in February with a group of plaintiffs, including the California Reinvestment Coalition. The settlement (covered by InfoBytes here) resolved a 2019 lawsuit that sought an order compelling the Bureau to issue a final rule implementing Section 1071 of the Dodd-Frank Act, which requires the Bureau to collect and disclose data on lending to women and minority-owned small businesses. Under the settlement’s terms, the Bureau agreed to outline a proposal for collecting data and studying discrimination in small-business lending by September 15, and to create a Small Business Advocacy Review panel by October 15 in order to prepare a report on the proposal. The Bureau is also required to submit status reports, which must detail the Bureau’s progress and address whether it is on track to meet all relevant deadlines to the plaintiffs and the court every 90 days until the final rule is issued.

    Updates on the following items are provided within the first status report: (i) the Bureau is continuing to work to resolve legal and policy issues in order to implement Section 1071; (ii) Bureau staff have begun drafting sections of the outline and started preliminary internal work to select small entity representatives who will consult with the panel; (iii) a survey seeking information from lenders on one-time costs for preparing and collecting data required by Section 1071 (covered by InfoBytes here) was postponed due to the Covid-19 pandemic, but the Bureau believes it can conduct the process without these results if necessary; (iv) the Bureau believes it is on track to meet the September and October deadlines, but notes that the Covid-19 pandemic may “introduce uncertainty with respect to the Bureau’s future ability to meet these deadlines,” and may also impact the Bureau’s ability to recruit small entity representatives to participate in the process; and (iv) the Bureau will notify the plaintiffs should it believe that a deadline extension is needed.

    Courts Federal Issues CFPB Fair Lending Dodd-Frank Section 1071 Covid-19

  • FTC reaches settlement with dealership to resolve UDAP and fair lending allegations

    Federal Issues

    On May 27, the FTC announced settlements with a New York City auto dealer and its general manager (collectively, “defendants”) to resolve allegations that the defendants engaged in illegal auto financing sales practices and maintained a policy of charging African-American and Hispanic car buyers more for financing that similarly situated non-Hispanic white consumers. The complaint alleges that the defendants violated the FTC Act, TILA, and ECOA. According to the complaint, the defendants engaged in deceptive and unfair practices by, among other things, allegedly (i) advertising low sales prices but failing to honor them; (ii) inflating the cost through a variety of methods, including telling buyers that they had to pay unnecessary charges to purchase “certified pre-owned” cars, double-charging consumers for taxes and fees without their consent, and altering the terms in the middle of a sale; and (iii) charge higher financing “markups” and fees to African-American and Hispanic customers.

    The defendants—who neither admit nor deny the allegations—have each agreed under the terms of the settlements (see here and here) to pay $1.5 million in consumer redress. The orders also prohibit the defendants from misrepresenting the cost or terms to purchase, lease, or finance a car, and require the defendants to obtain express, informed buyer consent for all charges and provide clear financing disclosures. The defendants are also banned from engaging in unlawful credit discrimination, and are prohibited from engaging in credit transactions unless they establish a fair lending program that will, among other things, provide training for employees and cap the allowed rate markups.

    The Commission vote authorizing the filing of the complaint and stipulated final order was 5-0. Commissioner Chopra issued a concurring statement addressing disparate impact and unfair discrimination in the auto industry, and emphasized it is time for the FTC to use its rulemaking authority to establish protections for car buyers and honest auto dealers. Commissioner Slaughter agreed that there is a need for auto financing and sales market reform, and suggested that the FTC can begin by initiating a rulemaking under Dodd-Frank to regulate dealer markups.

    Federal Issues FTC Fair Lending FTC Act TILA ECOA Enforcement Settlement

  • 11th Circuit will not rehear en banc city’s Fair Housing Act suit

    Courts

    On April 27, a majority panel for the U.S. Court of Appeals for the Eleventh Circuit denied the City of Miami Gardens’s petition for rehearing en banc after determining that the City “faced an uphill battle” to establish standing to bring a Fair Housing Act lawsuit against a national bank because it mainly relied on “an attenuated theory of injury.” As previously covered by InfoBytes, last July the 11th Circuit dismissed the City’s lawsuit against the bank for lack of standing after concluding, among other things, that the City’s evidence that certain loans may go into foreclosure at some point in the future “does not satisfy the requirement that a threatened injury be ‘imminent, not conjectural or hypothetical,’” and that the City failed to provide evidence that certain foreclosed loans had an effect on property-tax revenues or municipal spending or were issued on discriminatory terms. In explaining their decision to not rehear its 2019 ruling en banc, the majority stated that its decision—that the City failed to satisfy its burden of establishing standing—respects “the concerns and fairness and notice demanded by” both U.S. Supreme Court and 11th Circuit precedent. Two dissenting judges countered, however, that the rehearing should have been granted because, among other things, the 11th Circuit’s dismissal for lack of standing was done sua sponte “even though the City received neither proper notice that it failed to prove standing nor a legitimate opportunity to discover or produce the requisite evidence.”

    Courts Appellate Eleventh Circuit Fair Lending Fair Housing Fair Housing Act Foreclosure Property Tax Standing Mortgages

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