The Department of Housing and Urban Development this week issued a proposed rule to clarify its fair housing regulations which encompass lending practices.
"It is well established that liability under the Fair Housing Act can arise where a housing practice is intentionally discriminatory or where it has a discriminatory effect," the proposal says.
HUD maintains that is not necessary to prove intent when statistical information shows that lending practices are having discriminatory impact on minorities.
Attorneys call this legal approach "disparate impact."
HUD issued the proposal one week after the Supreme Court decided to review a fair housing case -- Magner v. Gallagher. The main issue before the high court is disparate impact and whether statistical results are enough to show that lenders are violating the Fair Housing Act.
Mortgage industry attorneys are hoping the Supreme Court will narrow or eliminate the use of disparate impact in fair lending cases.
"If the [HUD] proposal is designed to 'influence' the court, it is unlikely to be effective," said Paul Hancock, a partner at the K&L Gates law firm in Miami.
The comment period on the HUD proposal ends January 17.
