WASHINGTON — Eight trade associations sent a letter
to Department of Housing and Urban Development (HUD) Secretary Shaun
Donovan and Consumer Financial Protection Bureau (CFPB) Director Richard
Cordray requesting guidance and clarity on the bureau’s use of
disparate impact, a legal theory the CFPB recently evoked to target auto
According to the letter, the HUD recently finalized a regulation
under the Fair Housing Act that expressly provides for liability for a
facially neutral mortgage lending or servicing practice that has a
disparate impact, or “discriminatory effect,” upon a protected class,
even in the absence of any intention to discriminate.
The CFPB similarly stated in recent guidance that a disparate impact
theory of discrimination applies to and will create liability under the
Equal Credit Opportunity Act (ECOA).
The letter was signed by the American Bankers Association, American
Financial Services Association, Consumer Bankers Association, Consumer
Mortgage Coalition, Housing Policy Council of The Financial Services
Roundtable, Independent Community Bankers of America, Mortgage Bankers
Association and U.S. Chamber of Commerce.
“While we question the legal foundations underlying HUD’s final rule,
especially the burden shifting standards, this letter seeks clarity on
how the rule interacts with other requirements since the disparate
impact liability concerns appear incompatible with other federal
standards,” the letter reads. “Members of the associations seek written
guidance from HUD and the CFPB so that mortgage lenders and servicers
are able to meet their responsibilities under all mortgage lending standards.
“Given the significant amount of uncertainty created by the final
disparate impact rule and its intersection with the CFPB’s mortgage
rules, we urge you to set out written guidance for the industry that
makes clear that a lender will not be subject to disparate impact
liability based on specific actions undertaken to avoid liability under
the Dodd-Frank rules, such as making only or primarily QM safe harbor
loans or limiting QM rebuttable presumption or non-QM loans to borrowers
whose risks of default are low.”
To read the full letter, click here.