dhollier@imfpubs.com

The Federal Register on Tuesday included a notice rescinding agency guidance that encouraged the use of special purpose credit programs. These programs were designed to give lenders a way to meliorate the effects of historic discrimination against minority and other underserved communities.

The Federal Housing Finance Agency was among the agencies that disavowed these programs this week, although Director Bill Pulte directed Fannie Mae and Freddie Mac to end their support of SPCPs in March. FHFA is now joined by the Department of Housing and Urban Development, the Federal Deposit Insurance Corp., the National Credit Union Administration, the Comptroller of the Currency and the Department of Justice.

Under certain circumstances, SPCPs permitted lending guidelines based on the race, color, national origin or sex of the applicant. In 2022, the Biden administration issued an inter-agency statement endorsing this policy following HUD’s release of legal guidance assuring lenders that these kinds of race-conscious lending programs were compliant with the Equal Credit Opportunity Act and the Fair Housing Act.

But SPCPs ran afoul of President Trump’s aversion to diversity, equity and inclusion and other so-called “woke” programs. The administration points out that the provision of Regulation B that was used to justify the use of SPCPs has since been amended. Similarly, HUD has withdrawn its legal guidance justifying these programs.