On January 21, 2015, the United States Supreme Court heard oral argument in Texas Department of Housing & Community Affairs v. The Inclusive Communities Project, Inc. (the “Texas DHCA case”). The case presents the question whether the Fair Housing Act recognizes a disparate-impact theory of liability. See Tex. Dep’t of Hous. & Cmty. Affairs v. The Inclusive Cmtys. Project, Inc., — S. Ct. —, 2014 WL 4916193 (Oct. 2, 2014) (No. 13-1371) (granting petition for writ of certiorari). Under that theory, a plaintiff … Continue Reading
On Tuesday, the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) issued a compliance bulletin, CFPB Bulletin 2014-03, to help lenders avoid discrimination against recipients of Social Security Administration (“SSA”) disability income in violation of the Equal Credit Opportunity Act and its implementing regulation, Regulation B.
Creditors may occasionally feel stuck between a rock and a hard place when underwriting mortgage loans for disability income recipients. On the one hand, creditors have a legal obligation to ensure that applicants are able to repay any credit extended. When an … Continue Reading
On Monday, November 3, 2014, Judge Richard J. Leon of the U.S. District Court for the District of Columbia struck down the disparate impact rule promulgated by the U.S. Department of Housing and Urban Development (“HUD”) in March 2013 under the Fair Housing Act. The court held that HUD had issued the rule—codified at 24 C.F.R. § 100.500—in contravention of the plain language of the Fair Housing Act. The case is styled American Insurance Association, et al. v. United States Department of Housing & … Continue Reading
It has been a busy week in the fair lending space. Last week, the CFPB issued a white paper describing its proxying methodology for imputing race and ethnicity when analyzing fair lending compliance on non-mortgage credit products along with a proposed rule to oversee nonbank auto finance companies. This week, the Federal Financial Institutions Examination Council released the 2013 Home Mortgage Disclosure Act (“HMDA”) data, and the Federal Reserve released its own analysis… Continue Reading
The CFPB proposed a new rule on September 17, 2014, that would enable the Bureau to oversee nonbank auto finance companies. With the proposal, the CFPB takes another step toward expanding its supervisory authority over nonbanks. The Bureau released the proposed rule along with a report on recent examinations of bank auto lending activities and a white paper describing its proxying methodology for imputing race and ethnicity when analyzing fair lending compliance on non-mortgage … Continue Reading
The Home Mortgage Disclosure Act requires residential mortgage lenders to collect race and ethnicity information about loan applicants, and lenders, regulators and others routinely use this information to statistically evaluate whether there is a risk that a lender has discriminated against borrowers on a prohibited basis. With regard to other types of credit, with respect to which federal law generally prohibits the collection of demographic information, lenders and other interested parties must impute credit … Continue Reading
By: Melanie Brody, Anjali Garg*
*Ms. Garg is a Law Clerk and is not admitted to practice law.
CFPB (the “Bureau”) released a report to Congress on its fair lending activities on April 30, 2014. The report highlights the activities of the Office of Fair Lending and Equal Opportunity from July 21, 2012 through December 31, 2013. It provides an overview of the Bureau’s supervision activities and highlights the data collection activities of the Bureau in the areas of mortgage lending, auto finance, and other credit markets. The report explains how the Bureau uses its complaint database, along with … Continue Reading
On May 4-7, 2014 the Mortgage Bankers Association will hold its annual Legal Issues and Regulatory Compliance Conference in San Diego, CA. Several K&L Gates partners from the Consumer Financial Services Group will be presenting at the conference.
Melanie Brody will address “A Look Ahead: HMDA and Fair Lending” on Sunday, May 4, at 4:35 pm.
Krista Cooley will participate on a panel on Tuesday, May 6, at 3:15 pm, entitled “False Claims, Indemnifications, Repurchases and Rescissions.” She will discuss how the False Claims Act is affecting participants in HUD’s Federal Housing Administration loan program.
By: Melanie Brody, Anjali Garg*
*Ms. Garg is a law clerk and is not admitted to practice law.
On March 24, 2014, the Fifth Circuit issued an opinion in Inclusive Communities Project, Inc. v. Texas Department of Housing and Community Affairs applying HUD’s discriminatory effects rule and burden-shifting analysis to a Fair Housing Act claim. This is the first circuit court to apply the rule since it took effect on March 18, 2013.… Continue Reading
Recognizing that many creditors will be inclined to originate only “qualified mortgages” (“QM loans”) when the CFPB’s ability-to-repay rule takes effect in January, five federal regulators yesterday announced that a creditor’s decision to offer only QM loans will not elevate the creditor’s fair lending risk, absent other factors.… Continue Reading
On September 3, 2013, K&L Gates LLP filed a brief as amici curiae before the United States Supreme Court in Township of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc., a case in which the Court will consider whether the Fair Housing Act recognizes a disparate-impact theory of liability. The brief addresses the effect that the Court’s recognition of the disparate-impact theory would have on the residential mortgage lending industry and was filed on behalf of the American Financial … Continue Reading
Today, the Supreme Court granted certiorari in the appeal titled Township of Mount Holly, New Jersey v. Mt. Holly Gardens Citizens in Action, Inc., et al., No. 11-1507, agreeing to consider whether the Fair Housing Act allows claims under the disparate impact theory of discrimination. The disparate impact doctrine imposes liability on defendants for actions undertaken without discriminatory intent but which nonetheless have an allegedly disproportionately harmful effect on protected classes of persons.… Continue Reading
In an increasingly complex battle among the branches of the federal government, the Solicitor General recently urged the Supreme Court to deny certiorari in the appeal titled Township of Mount Holly, New Jersey v. Mt. Holly Gardens Citizens in Action, Inc., et al., No. 11-1507. The Mt. Holly matter seeks review of whether the Fair Housing Act recognizes a disparate impact theory of discrimination and if so, how courts are to analyze such claims. A disparate impact theory imposes liability on defendants for actions that are undertaken without discriminatory intent but … Continue Reading
On Thursday, May 9, K&L Gates and Ernst & Young co-sponsored a Fair and Responsible Banking symposium in New York City. The symposium gave our fair lending and UDAAP team a chance to discuss compliance and enforcement issues with over 70 in-house lawyers, fair lending officers and compliance officers from a wide array of institutions. K&L Gates and Ernst & Young strategized with capital markets investors, banks, mortgage lenders, auto lenders, credit card issuers and other unsecured lenders about how to tackle the challenges they face from today’s heightened regulatory scrutiny. The hot topics that were on everyone’s mind included, … Continue Reading
On March 21, 2013, the CFPB issued CFPB Bulletin 2013-02: Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act. In this bulletin, the CFPB describes its understanding of how the indirect auto lending industry works, and describes its view on how ECOA applies to indirect auto lending—including its theory on lender liability for disparities in dealer markups. The guidance offers advice to bank and nonbank indirect auto lenders within the CFPB’s jurisdiction on how they can limit their indirect auto fair lending risk.… Continue Reading
In an effort to reach more consumers, HUD’s Office of Fair Housing and Equal Opportunity launched a new mobile app for iPhone and iPad today. The app gives users instant access to HUD’s online housing discrimination complaint form and information about fair housing rights. After downloading the app, consumers and fair housing advocacy groups will have what HUD Assistant Secretary for Fair Housing and Equal Opportunity John Trasviña called “faster and easier” access to the complaint form. This makes sense for repeat complainants like fair housing advocacy organizations. But for the average consumer looking to file … Continue Reading
Last week, the Consumer Financial Protection Bureau (the “CFPB”) released its first Supervisory Highlights report, featuring issues that CFPB examiners discovered in the supervision period between July 21, 2011 and September 30, 2012. One issue upon which the CFPB focused was effective compliance management systems (“CMS”). This is not surprising given the CFPB’s focus since its inception on CMSs.… Continue Reading
This week the Non-Discrimination Working Group of the Financial Fraud Enforcement Task Force sponsored a webinar highlighting emerging fair lending issues and hot topics that financial institutions should be aware of as regulatory agencies continue to focus their attention on discrimination in the housing and finance markets. Whether you’re in the business of making residential mortgage, commercial, student, auto, or payday loans, or you offer credit cards, it is important to understand the regulators’ areas of interest and to ensure that your compliance program is designed to monitor and address any potential concerns in these areas.… Continue Reading
The Department of Justice recently announced a $21 million settlement with SunTrust Mortgage over allegations that SunTrust’s neutral and non-discriminatory policy of granting loan originators discretionary pricing authority somehow resulted in loans to minority borrowers to be priced higher than loans to White borrowers. DOJ based its case on the disparate impact theory of discrimination; as such, the Department did not allege that SunTrust treated minority borrowers in a disparate or discriminatory manner. Instead, the case follows DOJ’s practice of filing fair lending cases solely on statistical analyses of loan data … Continue Reading
In a rare and unexpected move, the City of St. Paul last Friday agreed to dismiss its appeal to the U.S. Supreme Court challenging whether a violation under the Fair Housing Act may be proved under a disparate impact legal theory, or whether proof of intentional discrimination is required. As we posted previously, the Supreme Court on November 7, 2011 granted certiorari in Magner v. Gallagher to determine that issue. All briefs in the matter had been submitted, and oral argument was set for later this month.… Continue Reading
On January 17, 2012, K&L Gates LLP submitted the comments of six financial services trade associations to the United States Department of Housing and Urban Development (HUD) on the proposed rule to implement a disparate-impact legal standard under the Fair Housing Act. The trade associations on whose behalf we filed the comments are: the American Bankers Association, the American Financial Services Association, the Consumer Bankers Association, the Consumer Mortgage Coalition, the Independent Community Bankers of America, … Continue Reading
Payday lenders recently received their first peek at what life will be like under the CFPB’s watch, and it’s not a pretty picture. In the Bureau’s recently released examination procedures for payday lenders, the CFPB makes clear that it will examine every aspect of a payday lender’s operation, likely well beyond what most payday lenders have experienced to date with the patchwork of state regulation.… Continue Reading
The CFPB wants to get to know you – well. But it’s not a prelude to a kiss.
On January 12, 2012, the CFPB released its new Mortgage Origination Examination Procedures Governing Banks and Nonbanks (the “Procedures”). The release of the Procedures follows close on the heels of the CFPB’s October 13, 2011 release of its mortgage servicing examination procedures (see The CFPB Mortgage Servicing Examination Procedures Fail to Harmonize – Isn’t It Ironic? ), and its January 5, 2012 announcement of its nonbank supervision program (see CFPB Officially Launches Nonbank Supervision Program).… Continue Reading
By: David A. Tallman
Adding to its already full plate, the Bureau of Consumer Financial Protection (the “CFPB” or the “Bureau”) recently requested public comment on its review of the various consumer financial protection regulations it has inherited from other agencies. The request signals that the Bureau does not intend for its higher-profile mortgage finance initiatives to overshadow its mandate to update, modify (or even eliminate) outdated, unduly burdensome, or unnecessary existing regulations. It also suggests that the CFPB is contemplating that its initial review of the inherited regulations may extend beyond mere technical corrections to more significant substantive changes.… Continue Reading