The U.S. Supreme Court last week validated the disparate-impact legal theory as it relates to housing discrimination in the case of Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc. And while the immediate effect of the ruling has more to do with the Department of Housing and Urban Development’s enforcement of the Fair Housing Act’s restrictions on disparate impact, there are definitely implications for the CFPB’s enforcement of the Equal Credit Opportunity Act’s prohibitions against disparate impact. The crux of this case was whether disparate-impact claims are cognizable under the Fair Housing Act of 1968, where a plaintiff alleges discrimination based on the disparate impact that a defendant’s “facially neutral” practice has upon members of ...

Here’s a fair lending regulatory compliance tip from the American Bankers Association’s 2015 regulatory compliance conference in Washington, DC: If you are advertising or marketing mortgage products in Spanish, you would be well advised to provide all requisite disclosures and servicing in Spanish. “As you think about how to reach people, advertising and marketing in Spanish is a good way to get to Spanish-speaking population,” said Andrew Sandler, chairman and executive partner at the BuckleySandler law firm, during a breakout session on fair lending. “But one thing regulators are intent on is, if you’re selling me in my language, then you need to be servicing me in my language too. So lenders should be careful to think about that,” the ...

The CFPB and the U.S. Solicitor General recently submitted an amicus brief to the U.S. Supreme Court in Hawkins v. Community Bank of Raymore, a case that will likely decide whether the Equal Credit Opportunity Act applies to loan guarantors, and may affect the bureau’s enforcement of a related regulation. As the government brief noted, ECOA makes it unlawful for “any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction,” on the basis of prohibited characteristics including gender and marital status. “Since 1985, regulations promulgated by the Board of Governors of the Federal Reserve System and the CFPB have provided that, for certain purposes, the ‘applicants’ protected from discrimination under the act include guarantors ...

Regulators such as the CFPB are still paying attention to fair lending issues these days, but their focal point is shifting more towards greater emphasis on access to credit. “What we’re seeing is a pendulum swing from the focus of concerns being loan pricing, to the focus of concerns being loan access,” said Jeffrey Naimon, a partner in the Washington, DC, office of the BuckleySandler law firm, during a webinar last week sponsored by Inside Mortgage Finance, an affiliated publication. Many wonder why it appears that access to credit remains so tight, seven years after the last financial crisis. Naimon said the CFPB ability-to-repay rule’s qualified mortgage standard could be one of the reasons. “Basically, lenders only want to make ...

Clearer FHA guidance on loan defects may help lenders avoid problems but they do not provide legal protection against costly government false-claim lawsuits, according to mortgage industry stakeholders. Long-anticipated rules issued recently by the FHA explain how the agency intends to categorize loan defects identified during an individual loan-level review of endorsed single-family mortgages. The loan-defect assessment methodology or “defect taxonomy” was first unveiled in September 2014 as part of the FHA’s Blueprint for Access, which outlined steps the agency is taking to expand lending to underserved and first-time homebuyers. Combined with the updated loan-certification language used by lenders to warrant compliance with FHA rules and the new Single Family Policy Handbook, FHA plans to use the taxonomy to create a stronger quality assurance program. With better quality ...

Financial institution regulators in Washington state have charged Quicken Loans with using false, deceptive and misleading advertisements to target veterans and active military members with adjustable-rate refinance offers. According to a complaint filed by the Division of Consumer Services of the Washington State Department of Financial Institutions, Quicken Loans falsely implied in its direct mailings that it is associated with the Department of Veteran Affairs. The VA provides guarantees to fixed- and adjustable-rate mortgage loans to veterans and servicemembers through the agency’s Home Loan Guaranty program. Quicken Loans allegedly used graphics in its 5/1 ARM solicitations that resembled the seal of the VA, with the words “Governed By: United States Veterans Department.” In addition, the Michigan-based lender allegedly used an ...

GNMA to Modernize Management of Loan Docs that Serve as Pool Collateral. Ginnie Mae plans to reform its document custody policies to minimize agency risks. Michael Drayne, Ginnie’s senior vice president of issuer and portfolio management, said the changes will apply to documents for loans that serve as collateral for securitized pools of mortgages. Current policies will be reexamined to see whether they adequately reflect and mitigate actual risks. Existing technology will be reevaluated as well. Ginnie will also study how to integrate document-custody functions and information into the agency’s systems. In addition, Ginnie will look at whether information about the status of pool collateral should be managed at the loan level, not merely the pool level. Furthermore, the agency will reevaluate the need to reexamine its enforcement methods and whether they should be ...

Most segments of the mortgage industry were relieved to get a two-month reprieve from the effective date of the Consumer Financial Protection Bureau’s integrated disclosures rule under the Truth in Lending Act and the Real Estate Settlement Procedures Act. The bureau this week formally proposed to move the effective date of the controversial new rule from Aug. 1 to Oct. 3. The CFPB said some delay is necessary because it was late in notifying Congress and the Government Accountability Office within 60 days of the rule’s effective date, as is required by the Congressional Review Act. Many in the mortgage industry still want...

Lenders are generally supportive of the FHA’s recently issued guidance explaining how the agency intends to categorize loan defects found in FHA single-family mortgages. At the same time, some observers find the guidance disappointing because it offers no protection for lenders against costly false claims lawsuits. The loan-defect assessment methodology or “defect taxonomy” was first unveiled in September 2014 as part of the Blueprint for Access that FHA hopes will expand access to credit by underserved consumers and first-time homebuyers. In particular, the new taxonomy will complement the updated loan-certification language used by direct-endorsement lenders to warrant compliance with FHA rules and the new Single Family Policy Handbook to create a stronger quality assurance program, according to Edward Golding, principal deputy assistant secretary for housing. The taxonomy has...

A number of recent headline-generating fair lending settlements may have focused largely on issues of pricing disparities, but there has been a sea change among policymakers these days moving in the direction of greater access to mortgage credit, some industry experts say. During an Inside Mortgage Finance webinar this week, Jeffrey Naimon, a partner in the Washington, DC, office of the BuckleySandler law firm, said the industry is seeing a pendulum swing from the focal point of concern being loan pricing to loan access. “Especially during the time when subprime loans were available, there was a lot of concern that minority borrowers were being steered into higher-cost subprime loans,” he told attendees. “The adoption of the loan originator compensation rule by the Consumer Financial Protection Bureau affected...