Fair Housing

The Fair Housing Act protects individuals who fall within one of the protected classes established under the law. The protected classes include:
  • Race
  • Color
  • Religion
  • Sex
  • Familial status
  • National origin
  • Handicap
  • Aggrieved persons have one year to file an action with HUD for violations of the Fair Housing Act.  When discriminatory acts or practices are ongoing, an aggrieved person must file a claim with HUD within one year of the last incident of discrimination (24 C.F.R. §103.35).  HUD’s Office of Fair Housing and Equal Opportunity will help aggrieved persons file their claims (24 C.F.R. §103.20).
    When HUD receives a complaint or helps an aggrieved person submit a complaint, it has 10 days from the date that the complaint is filed to serve a notice of the complaint on the respondent (24 C.F.R. §103.202).  After receiving a copy of the complaint, the respondent has 10 days to file an answer (24 C.F.R. §103.203).  HUD will provide notices to the aggrieved person and to the respondent of the right to resolve the alleged violations in federal court.  This notice will advise the parties that the statute of limitations for pursuing an action in court is two years from the date that the discriminatory practice occurred or two years after the last incident of an ongoing discriminatory practice occurred.

  • When neither the aggrieved person nor the respondent elects to resolve violations in court, HUD will pursue the process of conciliation by initiating an investigation. HUD must attempt to complete its investigation within 100 days of the date that a complaint is filed (24 C.F.R. §103.225). While conducting an investigation, HUD will seek voluntary cooperation from a respondent in providing access to records and documents and to individuals who may be able to provide information that is relevant to the complaint.  When necessary, HUD may subpoena documents and testimony, but only with the approval of HUD’s General Counsel (24 C.F.R. §103.215(b)).  

Investigations continue until HUD determines whether there is reasonable cause to believe that discrimination has occurred, or until the parties enter a written conciliation agreement. The goals of a conciliation agreement include:
  • Securing relief for the aggrieved persons, such as monetary and/or injunctive relief to eliminate discriminatory practices
  • Obtaining assurance that the respondent will eliminate any discriminatory practices, and
  • Vindicating the public interest through provisions that require the respondent to:
    • Participate in remedial efforts to eliminate discriminatory practices and prevent future discrimination, and
    • Comply with reporting requirements and monitoring activities
(24 C.F.R. §§103.310; 103.315; 103.320)
When an aggrieved party and a respondent enter a conciliation agreement, HUD has authority to monitor the efforts of the respondent to comply with the agreement. If HUD finds reasonable cause to believe that a respondent is not complying with the terms of a conciliation agreement, it must refer the matter to the Attorney General and recommend the filing of a civil action in federal court to enforce the agreement’s terms (24 C.F.R. §103.335).
HUD will issue a charge in cases in which conciliation is not achieved and its investigation shows reasonable cause to believe that a discriminatory housing practice occurred (24 C.F.R. §103.405(a)(3)).  A charge includes a written statement of the facts on which HUD is relying to find reasonable evidence of discrimination.  Within three business days of issuing a charge, HUD’s General Counsel will schedule a hearing with HUD’s administrative law judge and provide the charges and notifications regarding the hearing to the aggrieved person and the respondent.  HUD, the aggrieved person, or the respondent may then elect to pursue the claims in a judicial hearing in court instead of resolving them in an administrative hearing.  This decision must be made within 20 days of receipt of the charge (24 C.F.R. §103.410).
HUD’s regulations that outline the procedures for administrative hearings are extensive, and these rules cover both the pre-hearing and hearing processes. If a hearing is completed, HUD’s administrative law judge must issue an initial decision within 60 days of the end of the hearing. The decision will become final within 30 days after it is issued.
If an administrative law judge finds that a discriminatory housing practice, such as an unfair mortgage lending practice, has occurred or is about to occur, he/she can order the respondent to pay damages to the aggrieved person, issue other relief, such as injunction relief, and impose civil penalties.
HUD regulations authorize civil penalties of up to (per violation):
  • $16,000, if no prior administrative or civil hearings resulted in a finding that the respondent violated federal, state, or local fair lending laws
  • $42,500, if administrative or civil hearings conducted within the preceding five years resulted in a finding that the respondent committed one other violation of federal, state, or local fair lending laws
  • $70,000, if administrative or civil hearings conducted within the preceding seven years resulted in a finding that the respondent committed two or more violations of federal, state, or local fair lending laws

(24 C.F.R. §180.671(a))
An administrative law judge may impose separate penalties when a hearing results in a finding that there is more than one separate and distinct discriminatory housing practice (24 C.F.R. §180.671(e)). When a claim of discrimination under the Fair Housing Act is resolved through an administrative hearing, HUD has the authority to subpoena witnesses and documents. A person that willfully fails to respond to a subpoena may be subject to a criminal penalty of up to $100,000, imprisonment for up to one year, or both. These criminal penalties also apply if a person willfully:
  • Makes a false statement in a report or document that HUD subpoenas
  • Fails to produce accurate reports, documents, or other records, or
  • Mutilates or alters documentary evidence
  • At any time after its receipt of a complaint, if HUD determines that a civil rights matter demands “prompt judicial action,” it may ask the Attorney General to file a civil action. HUD will consult with the Civil Rights Division of the Department of Justice (DOJ) before determining that judicial action is needed (24 C.F.R. §103.500(a)). Reasons for HUD to make a referral to the DOJ may include the failure of a respondent to comply with a conciliation agreement (24 C.F.R. §103.335). The Attorney General also has authority to bring an enforcement action when there is “reasonable cause” to believe that an individual or entity is engaging in a “pattern or practice” of discrimination (42 U.S.C. §3614(a)).

  • For decades, courts disputed the legality of housing discrimination claims that were based on the theory of disparate impact.  Under the disparate impact theory, liability may result from a policy or practice that limits members of a protected class from access to mortgages or housing, even though the intention of the policy or practice is not to discriminate.  For example, if a lender has a policy of limiting its lending transactions to those involving loan amounts of $200,000 and above, this neutral policy has the effect of making home loans unavailable to borrowers who are shopping for lower-cost housing.  When these borrowers are minorities or members of other protected classes, the policy has an unintended discriminatory effect, which is illegal under the disparate impact theory.

The catchall phrase “or otherwise make unavailable” has been the focus of countless arguments both for and against the disparate impact theory, including an argument that ultimately made its way to the Supreme Court. In July 2015, with a close vote of 5 to 4, the Court upheld the disparate impact theory. During the months that preceded the Court’s ruling, participants in the lending industry predicted that a decision to uphold the disparate impact theory would lead to more litigation under the Fair Housing Act and create a number of compliance challenges for mortgage lenders.
In particular, lenders expressed concern about the dual challenge of avoiding liability under the disparate impact theory while complying with the Ability to Repay (ATR) Rule and the Qualified Mortgage (QM) Rule. The ATR Rule requires a thorough evaluation of a loan applicant’s repayment ability and prohibits the extension of mortgage credit based on the ability of a consumer to make initial low payments based on an introductory interest rate that will adjust to a higher rate when the initial rate expires. The QM Rule gives lenders the incentive to make qualified mortgages by extending a presumption of compliance with the ATR Rule to those that make fully-amortizing mortgages with terms that do not exceed 30 years and that limit the extension of these loans to borrowers whose debt-to-income ratios do not exceed 43%.

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