January 4, 2017
Fair Lending Fade-out
Bloomberg BNA quoted me in In 2017, Look for Pullback on Fair Lending Enforcement (behind a paywall). It opens,
Expect a pullback in fair lending enforcement in 2017, and especially less focus on disparate impact discrimination as the Trump administration takes office.
That’s the assessment of banking attorneys and others weighing the role of the Consumer Financial Protection Bureau, the Department of Housing and Urban Development, and the Justice Department in the uncertain year ahead.
Although a recent court ruling raises questions about CFPB Director Richard Cordray’s tenure, several said they expect the CFPB to be less assertive no matter who heads the agency.
Meanwhile, new leadership at the Justice Department and HUD means that disparate impact claims—allegations of discriminatory effect, without regard to subjective intent—will get less attention than in recent years.
David Reiss, professor of law at Brooklyn Law School in Brooklyn, N.Y., summed up the assessment of several interviewed by Bloomberg BNA on the picture ahead for 2017.
“I would guess that disparate impact won’t be a priority for the Trump administration,” Reiss said.
New Leadership Ahead
In November, Trump said he’ll nominate Sen. Jeff Sessions (R-Ala.) as attorney general. The president-elect also Dec. 5 named Ben Carson, the former director of pediatric neurosurgery at Johns Hopkins, as his candidate to lead HUD.
Alan S. Kaplinsky, a partner in Philadelphia who leads the consumer financial services practice at Ballard Spahr, said he doesn’t expect Sessions “to be a strong advocate for pushing the legal envelope on fair lending issues.”
And Carson might not use what some have called an “enforcement by litigation” approach to housing policy, according to Joseph Pigg, the American Bankers Association’s senior vice president for mortgage finance.
“Returning to a more normal enforcement regime should be a positive for borrowers and lenders alike,” Pigg told Bloomberg BNA. HUD spokesman Brian Sullivan declined to comment on the fair-lending outlook at HUD.
A Well-Known Unknown
Carson, a well-known physician and education reform advocate, took on an even higher profile by entering the 2016 White House race. But on lending, housing and other matters likely to come before him should he take the helm at HUD, Carson’s record is sparse.
One exception is a July 23, 2015, opinion piece in the Washington Times, where Carson criticized HUD’s Affirmatively Furthering Fair Housing rule. Although HUD has a distinct regulation that governs disparate impact claims under the Fair Housing Act, the AFFH rule has a different focus. The regulation, drawn from language in the Fair Housing Act itself, lays out a new process that HUD says “promotes housing choice and fosters inclusive communities free from housing discrimination.”
Carson criticized the AFFH rule, saying it would inject too much government decision-making into local housing policy. The rule, issued in the wake of the U.S. Supreme Court’s ruling in a major 2015 case on disparate impact claims under the Fair Housing Act, might actually frustrate efforts to develop new housing, he said.
Reiss predicted that Carson will either try to get rid of the AFFH rule, or decide not to enforce it. But he also said Carson’s stance on the regulation probably is somewhat nuanced.
“He’s acknowledged the history of redlining, restrictive covenants, and other problems,” Reiss told Bloomberg BNA. “He doesn’t seem to be denying a history of structural racism in the housing market. He seems to be saying the Affirmatively Furthering Fair Housing rule goes too far.”| Permalink