Tag Archives: fair housing

Miami Vice?

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by Roberlan Borges

REFinBlog has been nominated for the second year in a row for The Expert Institute’s Best Legal Blog Competition in the Education Category.  Please vote here if you like what you read.

The BNA Banking Report quoted me in BofA, Wells Fargo Try to Squelch High-Risk City Bias Suits (behind a paywall). It opens,

Bank of America and Wells Fargo are hoping an Election-Day U.S. Supreme Court argument will help them sidestep allegations of biased lending practices and the massive liability that could follow (Bank of Am. Corp. v. Miami, U.S., No. 15-cv-01111, argument scheduled 11/8/16).

At issue is a 2015 federal appeals court ruling that reinstated a Fair Housing Act lawsuit by the city of Miami. The suit said Bank of America and Wells Fargo made discriminatory home loans that spurred widespread foreclosures while driving tax revenues down and city expenditures skyward.

The U.S. Supreme Court is set to hear arguments Nov. 8, with a focus on two questions – whether Miami has the right to assert such claims, and whether it can establish the critical “causal link” by tracing its problems to actions by the banks.

The case is high on the “must-watch” list of banks and consumer advocates. The court’s decision will affect a series of separate lawsuits against Bank of America and Wells Fargo by other cities that are now on hold and awaiting a decision in this case, as well as lawsuits against JPMorgan, Citigroup, and HSBC.

“There are suits all over the country raising these issues,” said Karen McDonald Henning, associate professor at the University of Detroit Mercy School of Law. “The potential exposure to banks could be enormous.”

The case also could clarify how the law is applied to address societal wrongs, Henning added in an assessment echoed by Mehrsa Baradaran, associate professor of law at the University of Georgia School of Law in Athens, Ga.

“This could really give the Fair Housing Act some teeth to do away with problems it was meant to remedy,” she said.

Fair Housing Act

According to Miami, Bank of America and Wells Fargo violated the Fair Housing Act in two ways. The city said the banks intentionally discriminated against minority borrowers by targeting them for loans with burdensome terms.

Miami also said the banks’ practices had a disparate impact on minority borrowers that resulted in a disproportionate number of foreclosures and exploitive loans in minority neighborhoods.

Bank of America did not immediately respond to a request for comment ahead of the argument. Wells Fargo spokesman Tom Goyda declined to comment.

Both banks have consistently defended their lending practices, citing efforts to boost community development and trying in some cases to take what Wells Fargo has called “a collaborative approach” when it comes to disputes.

But both banks say the lawsuits are off-base as a matter of law. In its petition to the U.S. Supreme Court in June, Bank of America said the plaintiffs are making demands “based on a multi-step theory of causation that would have made Rube Goldberg proud.”

Risk Goes Local

Even so, if Miami’s suit is allowed to go forward, it could expose global financial institutions to liability from local governments across the nation, said Professor David Reiss of Brooklyn Law School in New York.

That’s new, he said. Although the federal government and state attorneys general have reached multi-billion settlements with banks in the wake of the financial crisis, local governments haven’t had much of a role in those battles, Reiss told Bloomberg BNA.

But if Miami’s suit goes ahead, mortgage lenders could face significant litigation costs and monetary judgments under new theories of liability. “These new theories are independent of the theories relied upon by the federal government and the states and could therefore expand the overall liability of financial institutions from the same underlying set of facts,” Reiss said.

No Mortgages for New Moms

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photo by tipstimes.com/pregnancy

Realtor.com quoted me in Mom on Maternity Leave Denied a Mortgage: Could It Happen to You? It opens,

Hopeful home buyers can be denied loans for all kinds of reasons, from a poor credit score to low income. It sucks, but it makes sense: Lenders prefer giving cash to people who can pay them back. (Can you blame them?) Yet, sometimes people are turned away for dumb reasons. Take, for instance, the recent case of a Philadelphia mom who was denied a mortgage because she was on maternity leave. It was even paid maternity leave, with a firm date to return to her job. What’s up with that?

According to the Washington Post, the mom in question (who remains anonymous) had applied for financing with her husband to fund renovations on a house in Philadelphia. But due to her maternity leave, her pay stubs showed she was on “short-term disability,” which prompted the loan’s underwriter to surmise she might not resume working full time—even though her employer was happy to submit a letter indicating the day she’d return to the office.

And this mom is hardly alone: Over the past six years, the Department of Housing and Urban Development has documented over 200 cases alleging maternity-related discrimination against women seeking mortgages. In one case, a lender in Arkansas allegedly told the applicant that she’d have to be back at work before her loan could close!

And this is a shame, because housing discrimination—based on gender, familial status, disability, race, and other factors—has been illegal since the Fair Housing Act of 1968. Yet apparently it still exists even at prominent mortgage companies, as evidenced by the cases against Wells Fargo, Bank of America, PNC Mortgage, and others.

As for why this happens, experts surmise it’s because some lenders have outdated notions of women in the workplace, presuming most will bail or scale back on their jobs once kids enter the picture, permanently reducing the family’s income and eligibility for a loan. But it’s hardly the norm: Census data suggest that more than half of first-time mothers return to work within three months. Another study by the Department of Health and Human Services’ Maternal and Child Health Bureau found that the average maternity leave lasted a mere 10 weeks.

Bottom line: These days, many moms return to the office—yet some mortgage companies have missed that memo. But luckily, some moms are fighting back—like the Philadelphia woman above, who has recently reached a “conciliation agreement” with the lender, Citizens Bank of Pennsylvania. Although the company denied discriminating against her, it also agreed to conduct fair lending training sessions with staff.

And more should follow, Shanna Smith, president and chief executive of the National Fair Housing Alliance, told the Post: “There needs to be much better training for [lenders] about how to deal with interrupted income for loan closings when a woman is pregnant and [on] paid maternity leave.

All of which may have women everywhere wondering: If they hope to buy a home, might maternity leave get in their way? And if so, what should they do? Probably the first step is just knowing that it’s wrong: Maternity leave—paid or unpaid—is not a legitimate reason to refuse a loan.

“It always helps when you know your rights,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “If your lender appears to be violating fair lending laws, you may want to raise the issue directly with your banker and ask to speak to the supervisor to ask the bank to clarify its policy. If your lender continues to enforce a discriminatory policy, you can reach out to the relevant regulators, including HUD and the Consumer Financial Protection Bureau.”

Affirmatively Furthering Neighborhood Choice

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Professor Kelly

Professor Kelly

Jim Kelly has posted Affirmatively Furthering Neighborhood Choice: Vacant Property Strategies and Fair Housing to SSRN (forthcoming in the University of Memphis Law Review). He writes,

With the Supreme Court’s Inclusive Cmtys. Project decision in June 2015 and the Obama Administration’s adoption, the following month, of the Final Rule for Affirmatively Furthering Fair Housing, local government accountability for ending segregation and resolving the spatial mismatch between affordable housing and economic opportunity has been placed on a more solid footing. Instead of being responsible only for overt, conscious attempts to harm protected groups, jurisdictions that receive money from HUD will need to take a hard look at their policies that perpetuate the barriers to housing opportunity for economically marginalized protected groups. The duty to Affirmatively Further Fair Housing, although somewhat aspirational in its formulation, requires HUD grant recipients to engage with fair housing issues in a way that the threat of litigation, even disparate impact litigation, never has.

For cities struggling with soft residential real estate markets, HUD’s concerns about land use barriers to affordable housing may seem tone deaf. Advocates challenging exclusionary policies have often focused on cities with high housing costs. Even a city with large vacant problems, such as Baltimore, was sued primarily because of its location with a strong regional housing market. But, concerns about social equity in revitalizing communities make the Final Rule’s universal approach to AFFH very relevant to cities confronting housing abandonment in its older, disinvested neighborhoods. This Articles has shown that attention to the Final Rule’s new Assessment of Fair Housing (AFH) reporting system is warranted both as a protective measure and as an opportunity to advance core goals of creating and sustaining an attractive and inclusive network of residential urban communities. (30-31)

For those of us who have trouble parsing the contemporary state of fair housing law in general and the AFFH rule in particular, the article provides a nice overview. And it offers insight into how fair housing law can help increase “the supply of decent, affordable housing options to members of protected groups . . .” (2) Not a bad twofer for one article.

Race, Poverty and Housing Policy

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Signing of the Housing and Urban Development Act

Signing of the Housing and Urban Development Act of 1965

Ingrid Gould Ellen and Jessica Yager of NYU’s Furman Center contributed a chapter on Race, Poverty, and Federal Rental Housing Policy to the HUD at 50 volume I have been blogging about. It opens,

For the last 50 years, HUD has been tasked with the complex, at times contradictory, goals of creating and preserving high-quality affordable rental housing, spurring community development, facilitating access to opportunity, combating racial discrimination, and furthering integration through federal housing and urban development policy. This chapter shows that, over HUD’s first 5 decades, statutes and rules related to rental housing (for example, rules governing which tenants get priority to live in assisted housing and where assisted housing should be developed) have vacillated, reflecting shifting views about the relative benefits of these sometimes-competing objectives and the best approach to addressing racial and economic disparities. Also, HUD’s mixed success in fair housing enforcement—another core part of its mission—likely reflects a range of challenges including the limits of the legal tools available to the agency, resource limitations, and the difficulty of balancing the agency’s multiple roles in the housing market. This exploration of HUD’s history in these areas uncovers five key tensions that run through HUD’s work.

The first tension emerges from the fact that housing markets are local in nature. HUD has to balance this variation, and the need for local jurisdictions to tailor programs and policies to address their particular market conditions, with the need to establish and enforce consistent rules with respect to fair housing and the use of federal subsidy dollars.

The second tension is between serving the neediest households and achieving economic integration. In the case of place-based housing, if local housing authorities choose to serve the very poorest households in their developments, then those developments risk becoming islands of concentrated poverty. Further, by serving only the poorest households, HUD likely narrows political support for its programs.

The third tension is between serving as many households as possible and supporting housing in high-opportunity neighborhoods. Unfortunately, in many metropolitan areas, land—and consequently housing construction—is significantly more expensive in the higher-income neighborhoods that typically offer safer streets, more extensive job networks and opportunities, and higher-performing schools. As a result, a given level of resources can typically house fewer families in higher-income areas than in lower-income ones.

The fourth tension is between revitalizing communities and facilitating access to high-opportunity neighborhoods. Research shows that, in some circumstances, investments in subsidized housing can help revitalize distressed communities and attract private investment. Yet, in other circumstances, such investments do not trigger broader revitalization and instead may simply constrain families and children in subsidized housing to live in areas that offer limited opportunities.

The final apparent tension is between facilitating integration and combating racial discrimination. Despite the Fair Housing Act’s (FHA’s) integration goal, legal decisions, which are discussed further in this chapter, have determined that the act’s prohibition on discrimination limits the use of some race-conscious approaches to maintaining integrated neighborhoods.

To be sure, these tensions are not always insurmountable. But addressing all of them at once requires a careful balancing act. The bulk of this chapter reviews how HUD programs and policies have struck this balance in the area of rental housing during the agency’s first 50 years. The chapter ends with a look to the challenges HUD is likely to face in its next 50 years. (103-104, citation omitted)

The chapter does a great job of outlining the tensions inherent in HUD’s broad mandate. It made me wonder, though, whether HUD would benefit from narrowing its mission for the next 50 years. If it focused on assisting more low-income households with their housing expenses (for example, by dramatically expanding the Section 8 housing voucher program and scaling back other programs), it might do that one thing well rather than doing many things less well.

The Founding & Evolution of HUD

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Omer Wazir

I had previously blogged about HUD at 50, a hefty tome filled with a lot of interesting chapters. Today, I focus on Chapter 1, written byJill Khadduri, The Founding and Evolution of HUD: 50 Years, 1965-2015 (starting at page 5). The abstract for the chapter reads,

This is an institutional history of the U.S. Department of Housing and Urban Development (HUD), focused on the development of HUD’s major policies and programs over the 50 years from its founding in 1965 to 2015. The chapter emphasizes how the successive secretaries of HUD and the political administrations they operated within shaped the agency and its programmatic responses to housing and urban issues. It attempts to place the evolution of HUD within the contexts of the housing, housing finance, and community development industries; other governmental institutions, including the U.S. Congress and other levels of government; and the most urgent housing and urban problems perceived during each secretary’s tenure. This chapter benefits from hindsight on which policies and programs appear to have had lasting importance. However, it does not focus on the outcomes of HUD policies and is not an assessment of HUD’s effectiveness in dealing with the issues of poverty, urban distress, housing quality and affordability, and fair housing over the past 50 years. (5)

There will be a lot that is familiar to housing nerds in this chapter, but its real value lies in putting all of the pieces together in a coherent narrative, charting the big changes in federal housing policy. How was federal housing policy related to urban policy? How was housing policy related to housing finance policy?  Where do Community Development Block Grants fit in?  How about housing vouchers? Fair housing policy? Enterprise Zones and Empowerment Zones? How important was homeownership vis-à-vis rental housing policy? When did special needs populations and the homeless get more resources? How did large-scale disaster relief fit into HUD’s mission? These issues, and more, are addressed and placed in broader context. Bottom line for housing nerds and aspiring housing nerds: read it, or at least skim it.

Housing Policy and Economic Mobility

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Pamela Blumenthal

Pamela Blumenthal

John McGinty

John McGinty

 

 

 

 

 

 

 

 

Pamela Blumenthal and John McGinty of the Urban Institute have written an interesting research report, Housing Policy Levers to Promote Economic Mobility. I generally believe that housing policy should be designed to assist low- and moderate-income households live in safe, decent and affordable housing, but I rarely consider how housing policy can actually help low- and moderate-income households become upwardly mobile. This report does just that and concludes,

At a time of growing income and wealth inequality, economic mobility provides a frame through which to consider the potential of housing policy to change the trajectories of individuals and communities. Economic mobility is about the opportunities individuals have to improve their economic well-being and requires education and other skill acquisition, available jobs, transportation networks, and other resources. Stable housing with access to those components gives low-income and minority individuals and families a chance to climb out of poverty. The current structures too often constrain individual choice because families cannot find affordable housing near a good school or in a safe neighborhood.

National policies that enforce fair housing, more fairly distribute tax benefits, and invest in people and places that have long suffered from disinvestment can begin to change the trajectory. State policies that fund affordable housing production and preservation in location-efficient areas and create requirements or incentives for local jurisdictions to integrate affordable housing throughout the community can also help.

To truly move the needle in promoting upward mobility, however, housing policy may need to adopt a lens through which programs are adopted, implemented, and evaluated based on their ability to promote upward mobility. Just as initial concerns about housing quality in the 1930s gave way to a focus on affordability in federal housing policy, another transition may be occurring. This goes beyond recognizing that a stable, safe, affordable home is critical to healthy development and well-being, to addressing the important role that neighborhood context plays—particularly for children. The importance of enabling all families to live in neighborhoods where they have access to jobs, good schools, parks, and other community resources and are free from violence, toxins, noise, and other harmful environments may become future federal housing policy. (41)

I don’t think that there is anything earth-shattering in this report, but it does focus attention on housing policy in a fruitful way.

Moving To Opportunity

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Mount Laurel

The Center on Budget and Policy Priorities has posted Realizing the Housing Voucher Program’s Potential to Enable Families to Move to Better Neighborhoods. It opens,

Housing Choice Vouchers help families afford decent, stable housing, avoid homelessness, and make ends meet. They also enable children to grow up in better neighborhoods and thereby enhance their chances of long-term health and success. When African American and Hispanic families use housing vouchers, for example, their children are nearly twice as likely as other poor minority children to grow up in low-poverty neighborhoods and somewhat less likely to grow up in extremely poor areas. Still, 280,000 children in families using vouchers lived in extremely poor neighborhoods in 2014. Vouchers could do much more to help these and other children grow up in safer, low-poverty neighborhoods with good schools.

Public housing agencies have flexibility under current Housing Choice Voucher (HCV) program rules to implement strategies to improve location outcomes, and state and local governments could facilitate these efforts. But without changes in federal policy to encourage state and local agencies to take such steps and to modify counter-productive policies — and reliable funding to maintain the number of families receiving HCV assistance and to administer the program effectively — there is little reason to expect better results.

Federal, state, and local agencies can make four sets of interrelated policy changes to help families in the HCV program live in better locations:

  • Create strong incentives for state and local housing agencies to achieve better location outcomes;
  • Modify policies that discourage families from living in lower-poverty communities;
  • Minimize jurisdictional barriers to families’ ability to live in high-opportunity communities; and
  • Assist families in using vouchers to rent in high-opportunity areas. (1)

This paper poses a number of concrete policy proposals for HUD to increase choices for voucher recipients. They include giving weight to location outcomes for recipients in measuring local housing agency performance; aligning these goals with the new fair housing rules; and providing incentive payments to local agencies that help voucher recipients move to higher-opportunity areas. (8) There are more concrete proposals in the paper that I leave to the reader to review.

What I like about these proposals is that many of them can be implemented administratively by HUD, just like the fair housing rules were. I hope HUD is giving this paper its full attention — there is a lot of good stuff in it that can help people move to opportunities that they cannot currently access.