Last week, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) issued a Notice of Proposed Rulemaking (NPR) proposing substantial revisions to the examination process in ways that do not all appear to align with the intent of the Act. CRA was established to address a legacy of redlining and divestment in low- and moderate-income (LMI) communities. However, the proposed changes raise concerns about how it will affect CRA’s charge to affirmatively meet the community needs for credit and services in LMI communities.
There are some key core issues at of critical concern, based on an initial review of the NPR. We ask that our members who are concerned about these regulations continue to check our website for further details be prepared to comment not only with regulators, but with members of Congress as well!
Where it Counts
How it Counts
There remain significant concerns in how the one ratio test may result in
Following the NPR release several civil rights/fair housing/consumer groups listed below issued a letter linked here: https://nationalfairhousing.org/2019/12/13/diverse-coalition-issues-joint-statement-on-proposed-changes-to-community-reinvestment-act/. Americans for Financial Reform Education Fund, Center for Responsible Lending, NAACP, NAACP Legal Defense and Educational Fund, Inc., National Association of Real Estate Brokers, National Coalition for Asian Pacific Americans Community Development, National Community Reinvestment Coalition, National Fair Housing Alliance, The Leadership Conference on Civil and Human Rights, and UnidosUS.
There was a sea of red at the Statehouse yesterday on Org Day as tens of thousands of teachers rallied as lawmakers returned for the ceremonial start of the 2020 legislative session. Legislators spent much of the day meeting with educators urging action on compensation, testing reforms and repealing certain professional development mandates.
As attention was focused on the #RedforEd movement, there was additional big news from House leadership as Speaker Brian Bosma announced he will retire after this session to move to a “national legislative campaign role.” Republicans in the House will confirm his replacement in the next two weeks. (Photo Source: Robert Scheer/IndyStar).
Prosperity Indiana's policy staff shared our 2020 State Priorities (see below) with numerous legislators throughout the day as well and specific legislation we are working with lawmakers to craft to address the critical
concerns of our members!
These efforts are focused on ensuring Hoosiers can remain in or gain access to safe, stable, and affordable housing and expanding consumer protections to more low-income households build and retain assets.
The best way you can prepare right now to help us advance these priorities is to register for our Statehouse Day on Tuesday, January 14, 2020, from 1-4 p.m. EST. At this event, we connect members with their legislators to share why these priorities are so critical to our network and our communities. If you have questions regarding these priorities or how to get more engaged in advocacy, contact our policy director, Kathleen Lara, at email@example.com.
We will keep you updated and engaged throughout session, but please be aware all hearings and session meetings are publicly available to stream live at www.in.gov/iga.
On Tuesday, Nov. 19, the House passed a month-long extension of the current short-term funding bill by a vote of 231-192. This measure represents the second continuing resolution of the 2020 fiscal year. This will would allow lawmakers to continue funding the government for 30 days while negotiating differences between the House and Senate FY20 spending bills. Lawmakers seem close to agreement on final spending levels, but key differences remain, particularly around funding for the Administration’s proposed border wall.
This measure has now moved to the Senate as members of Congress look to wrap up the week’s business before both the current federal funding deadline this Friday, November 21 and the Thanksgiving recess next week. This measure would continue FY 19 enacted funding levels for housing and community development programs.
The bill, however, has hit a procedural snag as the underlying bill used as a means to pass the short term funding bill is a funding bill Senate Republicans would like to avoid so as to keep it open to negotiations later in the year. In short, the House is likely to see the bill returned so that they use a different underlying bill to send back to the Senate. That becomes procedurally quite close to the Friday deadline for both the House to vote again and the Senate to vote for final passage.
What happened in the Senate spending bill?
We have outlined on this blog the House and Senate bill proposals for FY 20 spending. In our August newsletter, we urged members to call and urge our Senators to fund community development programs as the highest possible level under the agreed upon spending caps and to restore funding that was cut from HUD’s housing counseling budget. The final bill passed on October 31, by a vote of 84-9, without a change to the counseling program funding level, so we urge continued advocacy and calls to your House Representative and both Senators as negotiations continue.
Some amendment language was passed, however, that Prosperity Indiana believes strengthened the underlying bill, including a provision to allow the USDA to extend rental assistance agreements for projects financed by existing Section 514 or 515 loans for up to 20 years to help assisted residents remain stably housed for longer periods
Stay tuned to our social media and this blog for timely budget updates!
On November 11, the Fair Housing Center of Central Indiana (FHCCI) announced a record settlement in a lawsuit against a local business owner accused of targeting Latino communities with predatory land contracts for homeownership of properties that were frequently not in a habitable condition and inflated in their sales price. While the owner of the company in question, Casas Baratas Aqui (translated: “Cheap Homes Here”)
The FHCCI press release noted that several individual plaintiffs brought action in federal court in April 2018 alleging that the company violated the Fair Housing Act, Equal Credit Opportunity Act, Civil Rights Acts of 1866 and 1871, Truth in Lending Act, as well as several Indiana state statutes. Specifically, the company was accused of targeting Hispanic/Latino homeseekers, in particular, with a housing product that offered uninhabitable homes at high interest rates and home prices far above their property values. (Photo Source: IndyStar Article linked below, Sarah Stier, IndyStar)
As IndyStar reported, Amy Nelson, the Executive Director of FHCCI, stated that, “This is a ground-breaking resolution that will have a national impact on rent-to-own and land contracts by providing an example of requirements to ensure fairness in these transactions.”
The IndyStar article outlines one specific case where a plaintiff “entered a one-year lease with a monthly rental rate of $1,000. She was given the option to buy the home for $77,900.” The owner of the company, however, bought the house for only $32,000. The borrower also had a down payment of $8,500 and also required the borrower to “pay $69,400 with a 10 percent interest rate, in monthly installments of $746 for a 30-year term.” In addition to the high costs of this house, the plaintiff found that “the plumbing was completely clogged, the sink didn't function, the floor was rotted and the ceiling had started to collapse,” according to the case complaint. Further, the plaintiff was intimidated after, according to the complaint, “being told to be careful [about complaining] since they are 'illegal.'
These plaintiffs will see financial relief as a result of this settlement thanks to the FHCCI’s work. The owners said they would change their business practices based on this and the September 2019 ruling from the Indiana Supreme Court. (Photo Source: Indystar Article Screenshot, article authored by Crystal Hall)
Earlier this fall, the Court ruled in a case that similarly addressed predatory homeownership contracts. Prosperity Indiana joined the state, the city of Indianapolis, Neighborhood Christian Legal Clinic, the Notre Dame Clinical Law Center and National Consumer Law Center, and the Fair Housing Center of Central Indiana as amicus filers in the Rainbow Realty case where, similar to this instance, borrowers were required to pay for all repairs and maintenance as a homeowner would, but if they fell behind in their monthly payments, they would be treated like renters, facing eviction, not foreclosure, and losing all of their equity.
The Supreme Court’s ruling found that the contract in this case was a rental agreement and not a purchase agreement, as they had been told. Justice Geoffrey Slaughter wrote for the panel in stating, “attempted waiver of their obligations as landlords is void."
FOR IMMEDIATE RELEASE:
November 12, 2019
Hoosier Veteran, Faith, Community Groups Applaud Federal Bill to Protect Consumers from Predatory Lending
INDIANAPOLIS – A coalition of more than 100 Indiana-based veterans groups, faith-based organizations, non-profits, and civil rights organizations applauds the introduction of the Veterans & Consumer Fair Lending Act, a bipartisan bill sponsored by Senators Jeff Merkley (D-OR), Sherrod Brown (D-OH), Jack Reed (D-RI) and Chris Van Hollen (D-MD), as well as Representatives Jesus “Chuy” Garcia (D-IL) and Glen Grothman (R-WI). The coalition urges members of Indiana’s federal delegation to add their names as coauthors of the legislation.
If passed, the lending regulations outlined in the Military Lending Act (MLA), including a 36 percent interest rate cap on small-dollar, short-term loans (commonly known as payday loans), would be applied to all citizens. Right now, the protections only cover active-duty military members, leaving veterans and civilians vulnerable to lenders charging triple-digit interest rates. In Indiana, payday lenders charging up to 391 percent APR have drained over $300 million in finance charges over the past five years. Nearly 90 percent of Hoosiers want to see these loans capped at 36 percent APR.
“Extending the Military Lending Act is a clear message that our military (active and reserve), veterans, and their families are valued for their service to our nation,” said Brigadier General James Bauerle, Vice Chairman of the Military / Veterans Coalition of Indiana. “We cannot take for granted this group of great Americans as they have sacrificed so much and done so much so we can enjoy the freedom granted in our Constitution.”
Advocates from across Indiana have been recommending that state lawmakers enact a 36 percent rate cap for several years. To date, 16 states and Washington, D.C., have adopted similar legislation (a rate cap at 36 percent or lower) with promising results. At the state level, Senator Greg Walker (R-Columbus) Senator John Ruckelshaus (R-Indianapolis), Senator James Tomes (R-Evansville), Senator Vaneta Becker (R-Evansville), Senator Dennis Kruse (R-Auburn), Senator Jean Breaux (D-Indianapolis), Senator Mark Stoops (D-Bloomington), Senator J.D. Ford (D- Indianapolis), Senator Mike Bohacek (R-Michigan City), and Senator Lonnie Randolph (D-East Chicago) coauthored SB 104 in the 2019 session, which would have capped interest rates on small-dollar, short-term loans statewide at 36 percent APR. The bill failed to pass the Senate 22-27.
“Human service agencies across this state regularly see the damage and distress payday lending causes,” said Emily Bryant, President of the Indiana Coalition for Human Services. “Our members enthusiastically applaud the introduction of federal legislation to extend the Military Lending Act protections to all consumers.”
For more information, please see:
Financial Drain: http://www.incap.org/documents/Financial_Drain_Report2019.pdf
Bellwether Polling: http://incap.org/documents/INPaydayLendingMemo1.22.18.pdf
United States Department of Defense report: https://archive.defense.gov/pubs/pdfs/Report_to_Congress_final.pdf
WE NEED YOUR VOICE!
One of the most powerful tools in fighting housing discrimination is the Disparate Impact Rule, a bedrock legal principle under the Fair Housing Act. While disparate impact has been upheld by the U.S. Supreme Court as a legitimate means to target discrimination that often flies under the radar, the Administration has proposed revising this rule in a way that would preclude most from bringing future legal challenges.
Although the federal Fair Housing Act was passed in 1968, housing discrimination enforcement remains woefully incomplete. Nationally, it is estimated that 4 million incidents of housing discrimination occur each year. Without a strong Disparate Impact Rule, the ability to challenge these harmful practices becomes far more difficult. To now add additional and cumbersome barriers for individuals and organizations fighting discrimination is counterintuitive and counterproductive. You have until Friday, October 18 to urge the Administration to reverse this proposal.
Click here to access a pre-drafted letter you can easily add to/edit and submit directly.
Below you can review the full letter we submitted, but even comments that are just a few sentences expressing your concern about this proposed revision of the HUD Disparate Impact rule can have enormous impact. You can learn more about the proposed rule here: https://www.defendcivilrights.org
Docket No. HUD-2019-0067
October 16, 2019
Office of General Counsel, Rules Docket Clerk
Department of Housing and Urban Development
451 7th Street SW, Room 10276
Washington, DC 20410
To Whom It May Concern:
Prosperity Indiana appreciates the opportunity comment on the Department of Housing and Urban Development’s (HUD) Notice of Reconsideration of the Implementation of the Fair Housing Act's Disparate Impact Standard, Docket No. FR-6111-P-02. The Disparate Impact Rule has served as a critical tool in helping enforce anti-discrimination laws.
Our organization represents a network of more than 170 community development organizations dedicated to helping low-income Hoosiers achieve and maintain housing and economic security in each of our state’s 92 counties. Our members strive to ensure all Hoosiers can access safe, stable and affordable housing, and our work is focused on building a society where all persons can live and work in an environment that provides equitable access to economic and social opportunity. Central to that effort is ensuring we confront and eradicate instances of economic and residential discrimination and segregation.
For more than 50 years, the Fair Housing Act has made substantial strides in reducing the discriminatory practices related to renting or buying a home, getting a mortgage, or seeking housing assistance despite our government’s previous history of condoning or perpetuating those practices. As time moves on, the portion of that act that prohibits facially neutral policies that limit housing opportunities based on race, color, national origin, religion, sex, as well as the presence of families with children or people with disabilities, becomes ever more critical. Much of the discrimination that citizens face today manifests in these ways. That is why the Disparate Impact Rule is so critical. Since 2013, the uniform Disparate Impact Rule has been effective in establishing a rigorous, but fair process by requiring plaintiffs to establish a strong case, without undermining their reasonable ability to confront these practices. This Rule has empowered victims to remedy discriminatory practices that unfortunately persist far too frequently throughout our state of Indiana and across the country.
In the past five years alone, the Fair Housing Center of Central Indiana documented 947 fair housing allegations, opened 209 targeted fair housing investigations and assisted numerous persons with disabilities in obtaining reasonable accommodations after initial denials from housing providers, working alongside landlords and tenants to achieve equitable outcomes for all. In addition, the Center has initiated 12 federal court actions and 17 HUD/ Fair Housing Assistance Program complaints to intervene where there have been violations of fair housing law. In two of those lawsuits, more than 3,000 victims of housing discrimination are identified. The Disparate Impact Rule is essential to rooting out these discriminatory practices to fulfill the promise of the Fair Housing Act.
Contrary to HUD’s claims that the proposed revisions to this Rule are merely an effort to update the standard “to better reflect the Supreme Court's 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., and to provide clarification regarding the application of the standard to State laws governing the business of insurance,” we find this to be a brazen attempt to undermine the core tenants of the Act and disadvantage parties who have been injured by discriminatory practices to prevent them from successfully bringing forward a claim of disparate impact.
In fact, the majority opinion in the Inclusive Communities case quotes HUD’s rule extensively without any suggestion that its opinion was in tension with that rule. Instead, Justice Kennedy wrote, “In addition, it is of crucial importance that the existence of disparate-impact liability is supported by amendments to the FHA that Congress enacted in 1988. By that time, all nine Courts of Appeals to have addressed the question had concluded the Fair Housing Act encompassed disparate-impact claims.” The Court implicitly endorsed the 2013 Rule by not questioning or challenging it, and no lower court actions since the Inclusive Communities Project suggest that the three-step burden shifting standard is inadequate.
Despite that affirmation, HUD is now proposing dramatic changes to this Rule that blatantly favor defendants to the extent that it nearly invalidates the ability of individuals to effectively bring a case forward. Under the current Rule, §100.500, the three-step standard for presenting a prima facie case is simple. First, the plaintiff has the burden of proving a policy or practice caused or predictably will cause discrimination. Second, if that burden is established, the defendant must prove that the challenged practice is necessary to achieve their legitimate, substantial, nondiscriminatory interests. Third, if the defendant is able to prove that, the plaintiff must then prove that those interests could be served by a different policy or practice that has a less discriminatory impact. That standard is already rigorous in requiring plaintiffs to prove a strong case is present before the burden ever shifts to the defendant.
HUD now proposes to place the burden of proving “the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests” on the defendant as well. The revisions under consideration would impose a new five-point test before the defendant has any burden. Plaintiffs would have to do the following:
1) prove that a policy is “arbitrary, artificial, and unnecessary” to achieve a valid interest; 2) demonstrate a “robust causal link” between the practice and the disparate impact;
3) show that the policy negatively affects “members of a protected class” based on race, color, religion, sex, family status, or national origin;
4) indicate that the impact is “significant”; and
5) prove that the “complaining party’s alleged injury” is directly caused by the practice in question
Under the proposed revisions, the plaintiff must overcome nearly insurmountable barriers to establish their case and provide proof before discovery could even take place. That is essential because the discovery process often provides critical evidence illuminating the specifics of how certain policies and practices came to be implemented and their intent. These excessive barriers will require plaintiffs to anticipate what justifications a defendant may use and try to provide responses before the defendant is ever required to respond.
Further, a closer read of the revised language to §100.500 (b)(1) appears to suggest that if a practice is exceedingly profitable, it may be exempt from disparate impact claims – even if a plaintiff can demonstrate discriminatory outcomes. The current Rule in that section requires the defendant to show that the challenged practice is “necessary to achieve one or more substantial, legitimate, nondiscriminatory interests.” The revision would shift the burden to the plaintiff and requires that the plaintiff show the practice is “unnecessary to achieve a valid interest or legitimate objective such as a practical business, profit, policy consideration, or requirement of law.” This addition of “profit” invites arguments from defendants claiming exorbitant profit may be a legitimate basis to continue the practice.
Finally, the proposed revisions provide new, broad defenses that landlords, lenders and other defendants can employ to subvert responsibility. Those include a defense enabling them to agree that a model used by the defendant in question may be discriminatory, but could be the fault of statistics and algorithms informing their practices related to credit scoring, pricing, marketing and underwriting. While these can still be harmful and discriminatory, the companies using these practices may not be held responsible for their consequences.
Under this proposal, we believe there will no protection against a landlord evicting victims of domestic violence, based on common leases that hold all tenants, even victims, responsible for crimes in their homes. We believe landlords could legally turn away applicants who do not hold full-time jobs, affecting people with disabilities or seniors. We believe an apartment building could also restrict occupancy to one person per bedroom. Families with children would be barred from renting or would be forced to rent more expensive multi-bedroom apartments. We also believe it could allow an insurance company to refuse to insure homes under a certain dollar value. In many communities, this would exclude homes in neighborhoods of color from quality insurance and would prevent homeowners in those areas from fully protecting their homes.
After decades of slow, steady progress, this proposal would eliminate the incentive for property owners, lenders and insurers to adopt stronger policies that better serve us all. It would also eliminate the right of victims of discrimination from reasonably accessing justice. On behalf of our network striving to ensure more residents of Indiana can prosper and live in safe, secure housing, we urge HUD to withdraw this proposed reconsideration of the Disparate Impact Rule and appreciate the opportunity to comment.
Throughout the state this summer and fall, Prosperity Indiana went on the road hosting six regional Policy & Pizza meetings designed to share our 2020 Policy Priorities, but also to help build or deepen direct relationships between our members and legislators. We are thrilled by the results and thankful that at each meeting, legislators were able to hear local context for our priorities and witness the local partnerships among our network as PI members work to address considerable community development challenges.
We were also excited to lift up key successes among our network. We look forward to continuing to find ways to continue this engagement! One key way to touch base with legislators again is at our Statehouse Day on Tuesday, January 14, 2020 from 1-4 pm EST. Registration is free for members and we set up all legislator meetings and provide talking points. Let's keep building on all of this advocacy momentum as we head into 2020!
On September 27, the President signed a continuing resolution (CR), or stopgap funding measure, to keep the government funded through November 21 in an effort to give the House and the Senate to debate differences in their appropriations bills. The full Senate has not approved their appropriations bills as the House has, but the Appropriations Committee did approve the bills, meaning they are ready to be considered on the floor.
Below is an updated budget chart for many of PI's member interests for appropriations bills for housing and community development programs within the Department of Housing and Urban Development and the Department of Agriculture. Members of the Campaign for Housing and Community Development Funding (CHCDF) have sent a letter to Appropriations leaders in both chambers urging them to include the highest possible allocations to support affordable housing under the budget deal.
Overall, the Senate proposal for the HUD budget provides than $11.9 billion above the president’s FY20 request and $2.3 billion above FY19 enacted levels, but still $1.5 billion less in funding than the House version. Key line items of concern to our members include the net loss to already underfunded Housing Counseling budget as well as funding for HOPWA and the Public Housing Operating Fund.
NOW IS THE TIME TO REACH OUT TO OUR SENATORS AND RESPECTFULLY URGE THEM TO PASS THE HIGHEST POSSIBLE FUNDING LEVELS UNDER THE BUDGET AGREEMENT FOR HOUSING PROGRAMS TO ADDRESS OUR STATE’S AFFORDABILITY CRISIS.
Senator Young: (202) 224-5623Senator Braun: (202) 224-4814
In terms of policy matters addressed in the Senate THUD bill, the legislation joins the House bill in prohibiting the Administration’s proposal for rent increases and rigid work requirements, but does not include the House-passed language to halt the Administration’s proposal to evict mixed-status families from assisted housing and to roll back LGBTQ protections.
On Tuesday, September 17, the Senate Transportation, Housing and Urban Development, and Related Agencies (THUD) Appropriations Subcommittee today approved its FY20 appropriations bill, laying out critical housing and community development program funding levels for our communities and member network. Last week, the full Senate Appropriations Committee determined how much each subcommittee would receive and the Senate allocated $74.3 billion for the THUD Subcommittee, which is roughly $1.5 billion less than the House proposal, but $3.2 billion above FY19 enacted levels.
The measure will go on to be considered Thursday (September 19) by the full Senate Appropriations Committee. Click here for an updated budget chart.
Today, the Senate Banking Committee heard testimony from Treasury Secretary Steven Mnuchin, HUD Secretary Ben Carson, and Federal Housing Finance Agency Director Mark Calabria regarding the Administration’s proposal to overhaul the nation’s housing finance system. Secretary Mnuchin outlined the Administration’s vision for the future of two giant companies, Fannie Mae and Freddie Mac, that back half of the nation’s mortgages by buying mortgages from lenders, then selling packaged securities to investors. The two companies also have an affordable housing mandate to support access to affordable, 30-year mortgages. They have also been under conservatorship, or government control, for 11 years.
The plan would make these companies private again, but require a fee for the government protection they receive and eliminate a requirement that the companies send their profits to the Treasury Department. Secretary Mnuchin noted that Fannie Mae and Freddie Mac currently have a combined $6 billion in capital but said they should have about $100 billion and that creates an intense reliance on Treasury support. The companies did receive nearly $200 billion in bailouts, but as the market has been working towards recovery, they have since contributed $300 billion in dividends to the Treasury Department. This dynamic complicates the reform roadmap for moving forward.
There is bipartisan support for the need to come up with a plan to end conservatorship and move the mortgage giants move forward, but significant concerns over the proposal were raised regarding the implications for moderate-income households seeking a stable, affordable home loan. The proposal calls for eliminating the affordable housing goals in favor of having the Federal Housing Agency and Congress create “more efficient mechanisms” for Fannie Mae and Freddie Mac to achieve those goals with the goal for delivering tailored support to lower-income, rural and first-time home buyers. Changes to current mandates could have sweeping effects on credit access for first-time homebuyers who lack a 20 percent downpayment.
The plan would also allow for private competitors in the market for the first time who would not have the same obligations or guarantees. This could affect efforts to address racial homeownership gaps. During the hearing, numerous Senators pointed out that the black homeownership is just over 40 percent, which is actually lower than when the Fair Housing Act was passed in 1968 while white homeownership has consistently increased over that time to 73 percent.
Jesse Van Tol, chief executive of the National Community Reinvestment Coalition, noted that the plan would “open the market up to competitors for the first time and introduce private guarantors that won’t have the same obligations as Fannie Mae and Freddie Mac.”
Numerous senators also focused on the proposal’s proposal that would release Fannie and Freddie from their “duty-to-serve” requirements that increase lending in rural communities. We will continue to update members on any further negotiations or discussions around this and other housing finance proposals.