The Department of Housing and Urban Development has confirmed its proposed reversal of a 2020 change to a rule governing Fair Housing Act claims.
A new rule set to go into effect 30 days after publication in the Federal Register reverses the one the Trump administration put into place related to so-called disparate impact claims. The 2020 rule made it tougher to allege lending discrimination.
Its rollback officially brings back the 2013 discriminatory effects rule, which called for a three-part test for claims of discrimination. The 2020 rule would have imposed a five-part test, and would have required plaintiffs to not just show the effects of discrimination were evident but that it had an intentional cause. Given the rollback, plaintiffs no longer need to prove intent.
“Discrimination in housing continues today and individuals, including people of color and people with disabilities, continue to be denied equal access to rental housing and homeownership,” HUD Secretary Marcia Fudge said in a press release. “Today’s rule brings us one step closer to ensuring fair housing is a reality for all in this country.”
In practice, the Trump-era rule was on hold due to a preliminary injunction in Massachusetts Fair Housing Center v. HUD, a case filed in federal district court.
“Accordingly, regulated entities that were complying with the 2013 rule have no need to change any practices they have in place to comply,” HUD noted.
The 2020 rule originally sparked a division between large and small mortgage lenders.
More sizable banks like Wells Fargo, JPMorgan Chase and Bank of America urged the Trump administration to shelve it due to heightened national racial tensions at the time. In contrast, the Independent Community Bankers of America supported it, citing its potential to reduce frivolous claims.
The rollback of the 2020 change is in line with the Biden administration’s broader efforts to eliminate the racial gap in homeownership.
HUD recently also proposed an update to the “affirmatively furthering fair housing rule,” which is aimed at establishing more equity in homeownership at the local level. The update is intended to strengthen its impact without placing undue pressure on municipalities.