Mortgage Lending Discrimination

Widespread Discriminatory Housing Appraisals Persist in the U.S.

A large number of Black property owners hold that white appraisers are using their race to determine the worth of their homes. About 97% of appraisers in the U. S. are white, according to the Bureau of Labor Statistics. The National Community Reinvestment Coalition (NCRC) and other advocates report the result is widespread appraisal discrimination. In 2022, the NCRC released a report finding that the average appraiser gave a value that was $7,000 higher to the same home owned by a white rather than a Black.

In one high-profile case, the Baltimore-area home of Dr. Nathan Connolly and Dr. Shani Mott was valued at nearly $300,000 more when they performed a “whitewashing experiment” in 2021, removing family photos and asking a white colleague to stand in for them. The couple has filed a lawsuit in Maryland, and the U. S. Department of Justice unusually issued a statement of interest in their case, just as they did last year with the case of Mr. Austin and Ms. Tate-Austin.

Redlining, a Depression-era practice that denied mortgages to people of color in certain neighborhoods, continues to drive down home values in Black neighborhoods, and today, racism and discrimination are still inextricably entwined in housing values.

A recent possibly discriminatory example is the case of Terry Horton who has been a Cincinnati landlord for over 10 years. He has rented to single mothers who rely on Section 8 housing assistance to pay their rent, and he and all of his tenants are Black. To free up cash for buying a new apartment building, he wanted to refinance his three-unit rental property in Cincinnati's North Avondale neighborhood, near Xavier University and with a roughly $39,000 median family income. His lender estimated the property’s value at around $500,000. But an appraiser declared his property worth only $359,000.

Horton believes that the first appraiser, who is white, discriminated against both him and his tenants because of their race - all were whom met the appraiser. Two more appraisals of  Horton’s property had higher values, though by the time Horton reapplied for a loan based on the later values, interest rates had climbed so that it was not advisable to refinance his mortgage. “It was completely devastating,” Horton said. “It rips the whole bottom out when you come to the realization that because of the color of your skin, they’re devaluing your property.”

He recently filed a complaint to HUD with the National Community Reinvestment Coalition, which works for increased wealth in low-income communities. The complaint cites multiple methodological and factual errors in the first appraisal done by Brent Martin of Martin Appraisal Company. Martin Appraisal Company was subcontracted by Appraisal Nation, an appraisal management company used by Horton’s lender, Stratton Equities.

According to the complaint, Martin underreported the size the property by over 500 square feet, selected nearby properties of comparable size and quality within a smaller size bracket than Horton’s property, underreported the number of bedrooms, and underestimated Horton’s monthly rental income by over $450. After Horton disputed, Appraisal Nation refused to change its $359,000 valuation. 

HUD confirmed receipt of the complaint and has begun processing it. Should HUD determine that there is cause to suspect discrimination, the case could be moved to a HUD administrative or to a federal judge.

*****

Read the March 18, 2023 New York Times article.

Read the February 27, 2023 NCRC article.

 

 Fair Housing Law

HUD Restores “Discriminatory Effects” Rule to Strengthen Fair Housing Enforcement

On March 17th, the U.S. Department of Housing and Urban Development (HUD) announced that it has submitted to the Federal Register a Final Rule entitled Restoring HUD's Discriminatory Effects Standard. This cancels HUD's 2020 rule that weakened Fair Housing Act disparate impact claims and restores the 2013 discriminatory effects rule. In the new Rule, HUD states that the 2013 rule is more consistent with how the Fair Housing Act pertains to the courts, and that it more effectively implements the Act's remedial purpose of eliminating unnecessary discriminatory practices from the housing market.

The restored discriminatory effects policy (which includes disparate impact and perpetuation of segregation) provides a strong means to tackle those policies that unnecessarily cause systemic housing  inequality, even if not adopted with discriminatory intent. For many years, it has been used to challenge policies that exclude people from housing opportunities, including zoning requirements, lending and property insurance policies, and criminal records policies. 

The rescinded 2020 rule weakened HUD's 2013 discriminatory effects rule that legally supported Fair Housing Act cases involving discriminatory effects for cases filed with HUD and by private plaintiffs. The 2013 rule was that a policy with a discriminatory effect on a protected class was illegal if it did not produce a substantial nondiscriminatory interest or if a less discriminatory alternative could also serve that interest. The 2020 rule added new pleading requirements, new proof requirements, and new defenses that made it more difficult to prove that a policy violating the Fair Housing Act was lawful. 

Due to a court ruling halting the implementation of the 2020 Rule in Massachusetts Fair Housing Center v. HUD, the 2020 Rule never went into effect. 

Read HUD’s Final Rule on Restoring HUD's Discriminatory Effects Standard.

For more information, read this Fact Sheet.

*****

Read the March 17, 2023 HUD press release.

 Book Review

Being Heumann: An Unrepentant Memoir of a Disability Rights Activist

By Judy Heumann and Kristen Joiner. Beacon Press, 2020. 240 pages. $26.95, hardcover.

In this autobiography, Heumann tells her story of fighting for the right to receive an education, have a job, and work for basic human rights for people with disabilities.

"Paralyzed from polio at eighteen months, Judy’s struggle for equality began early in life. From fighting to attend grade school after being described as a “fire hazard” to later winning a lawsuit against the New York City school system for denying her a teacher’s license because of her paralysis, Judy’s actions set a precedent that fundamentally improved rights for disabled people." Her expensive advocacy work lead to the creation of the Americans with Disabilities Act, as well as several other important laws and regulations positively affecting the lives of people with disabilities.

 Civil Rights Obituary

Judy Heumann, Disability Rights Advocate, 75

Judy Heumann advocated for the inherent dignity of people with disabilities, campaigning for federal civil rights legislation while organizing sit-ins, marches, and other nonviolent demonstrations. Heumann, who was paralyzed from childhood polio, filed  a lawsuit to become the first New York City public school teacher to use a wheelchair (teaching at a Brooklyn elementary school). 

She was among the nation’s most prominent champions for disability rights, and advocated for disabled people as an official in the Clinton and Obama administrations, as an adviser for the World Bank, and as the first director of the D.C. Department of Disability Services. President Joe Biden described her as “a trailblazer - a rolling warrior - for disability rights in America,” adding that “her courage and fierce advocacy” contributed to the passage of landmark legislation including the Rehabilitation Act, the Individuals with Disabilities Education Act, and the Americans With Disabilities Act of 1990, which outlawed discrimination based on disability. She also wrote an autobiography (reviewed in the Interesting Books section of this issue).

Heumann also ran the San Francisco Center for Independent Living, worked for the U. S. Education Department as assistant secretary of the Office of Special Education and Rehabilitative Services, and helped start several disability nonprofits. Heumann was probably most known for her advocacy for the Rehabilitation Act of 1973, an ADA predecessor banning discrimination against disabled people in programs receiving federal funds. When President Richard M. Nixon vetoed an early version of the act, she organized a sit-in on Madison Avenue that stopped traffic in New York City.

After the legislation was voted into law, successive administrations delayed implementing Section 504, the key regulation. So, in early 1977, Heumann - and over 100 disabled protesters, interpreters, and care aides, including activists who were blind or deaf, and others who had development disabilities or used motorized wheelchairs - staged a nearly four-week-long sit-in at a San Francisco federal office building pushing for the regulations to be approved. This 504 Sit-in, as it became known, was a turning point in the disability rights campaign, later called the movement’s Stonewall or Selma, and one of the longest nonviolent occupations of federal property. The HEW secretary signed off on the regulations, a victory to Heumann and her fellow demonstrators. The activists occupied the office building for two more days to celebrate and clean up.

When young, she attend Camp Jened, a summer camp for people with disabilities. The camp, which became the focus of the Oscar-nominated 2020 documentary “Crip Camp,” served as a “playground,” as she put it, for future disability rights movement leaders. 

President Barack Obama appointed her the State Department’s first special adviser for international disability rights. In that role, she pushed for the nation to ratify the Convention on the Rights of Persons With Disabilities, a United Nations treaty that failed to pass the U.S. Senate.

*****

Read the March 6, 2023 Washington Post article.

 Predatory Payday Loans

California to Regulate Fintech Payday Loans After Study Finds Exorbitant Rates

Some states are fine-tuning their financial regulations to regulate so-called "junk fees" from payday predatory loans that add up to hundreds of dollars a year, draining wealth from communities of color and other vulnerable users of fintech payday loans, many with less than $25,000 income.

To this end, the California Department of Financial Protection and Innovation (DFPI) has proposed new state regulations governing disguised fintech credit. It basically has widened the definition of fintech loans subject to stringent regulation. DFPI also has released new data showing the high costs for consumers who use earned wage advances and other fintech payday loans. Advocates have praised the proposal as a rejection of claims that these payday loans are not loans.

The resulting "junk fees" add up to hundreds of dollars annually, significantly draining wealth from communities of color and other vulnerable users of these loans, many making less than $25,000.

With this proposed regulation, California has officially recognized that earned wage advances and other fintech payday loans are loans, and that ‘tips,’ instant access fees, and other fees resulting in triple-digit interest rates are subject to state rate limits. Its data found that fintech payday loans, whether employer-based or direct to consumer, have exorbitant triple-digit APRs and force borrowers into the a debt trap cycle like traditional payday loans.

The study utilized data that DFPI has been collecting from earned wage advance providers and other fintech payday lenders, and found that: (1) Tips were included in 73% of the more than 5.8 million advances made to California consumers, and the APRs varied between 328% and 348%; (2) The APRs for advances from companies not accepting tips were between 315% and 344%; and (3) The APRs for companies that accept tips and those that do not are similar to the average APRs for licensed payday lenders in California.

DFPI proposed regulations that require providers of income-based advances, whether employer-integrated or not, to register with or obtain a license from DFPI; and comply with the fee and interest rate limits of the California Financing Law, which caps the interest rate on loans up to $2,500 at 30% or lower, depending on the size of the loan, plus lenders may charge an administrative fee that cannot exceed 5% of the advance. 

DFPI stated that by treating tips as charges, lenders who rely on tips and payday lenders and others who do not can compete on a level playing field.  Despite claims that ‘tips’ are voluntary, companies have ways of pushing people into paying. DFPI’s data evidences that workers pay heavily, with costs virtually identical to those of traditional payday loans. 

The regulations cover several types of fintech payday loans, such as earned wage advances that access employer time and attendance records (i.e., DailyPay, PayActiv, Even) ; cash advances that purport to be earned wages but have no connection to an employer or its payroll system (Earnin); and cash advances offered by nonbank banking apps (i.e., Money Lion, Dave, Brigit). 

Legislation recently introduced in several states, including Georgia, Kansas, Mississippi, Nevada, and Vermont, would exempt fintech payday lenders from interest rate limits and other consumer protection laws. Many are based on a model law proposed by the conservative American Legislative Exchange Council.

The proposed rule also adopts requirements for education financing (including income share agreements (ISAs)), debt settlement, and student debt relief providers. ISAs are most often used to finance higher education by requiring the borrower to pledge a share of their future income, but costs can be obscured and can add up to far more than traditional student loans.

*****

Read the March 17, 2023 NCLC release.

National, State, and Baltimore Evictions

Evictions Rise Above Pre-Pandemic Levels

The study by the Princeton University's Eviction Lab has found that the rate of eviction filings has returned or exceeded pre-pandemic levels in many U.S. cities recently, stimulated by the historically high cost of housing and other basic necessities. The Lab's aims to fill the "information hole in the center of the evictions crisis" by collecting data from court filings and other sources.

The Lab's estimated national number of evictions for 2018 was 3,656,427.8 filings affecting an estimated 46,902,048 households, with a rate of 0.078. An estimated 2,734,662.8 households were threatened with eviction. For Baltimore, there were 52,200 Baltimore households threatened by eviction, with a 36.6% threatened rate compared to the national 7.8%. According to the Lab for 2018, Baltimore had a rate of 92.3 evictions filed for every 100 residents, with 132,000 evictions filed that year. The is extremely high, however, but because of the way Maryland records eviction notices, it has a much higher filing rate than elsewhere, but not necessarily more evictions. In Maryland, the eviction process starts with an eviction filed in court rather than most other states filing an out-of- court notice delivered to a tenant. Many landlords file against their tenants every month, resulting in a very high case volume. Here, the number of filings is inflated because of unique court procedures, resulting in a high rate.

During the recent - and continuing - COVID pandemic, widespread official local and national eviction moratoriums helped keep many families in their homes. Now, however, those moratoriums have expired in most areas, and many are faced with the threat of displacement. This is particularly bad now because the high rent costs have renters spending a historic percentage of their paychecks on monthly housing bills.

The study found that the eviction crisis tends to disproportionately affect minority groups — particularly Black women. In the Twin Cities, for example, a weekly average of around 300 evictions have been filed over the last four weeks. This is compared to 20 per week during the moratoriums.

Philadelphia, Cleveland, and some others have recently started or expanded programs to help tenants access financial relief, stay in their homes during eviction disputes, or mediate tenant-landlord disputes. Some other recently-enacted "good cause" bills restrict evictions to cases where tenants violate their lease agreements, as well as limit major rent increases.

It is important to note that the Eviction Lab's 34-city data set does not include illegal evictions or cases where renters are forced out primarily because of  large rent hikes. However, the Eviction Lab's data set is the nearest equivalent to a nationwide evictions database. It contains a newly updated map of all 50 U.S. states & D.C., with the ability to search for an individual "county, compare data across regions, interact with demographic characteristics, and create local reports." Recently added features also include data from 2000 to 2018, estimated data for every county in all states & D.C., and the new variable of households threatened with eviction.

While the U.S. Department of Housing and Urban Development is working on new data-collection efforts, there is currently no government national database with full coverage. As a result, the available data always understates the eviction problem and makes policy development more difficult.

*****

Read the March 16, 2023 AXIOS article.

 Community Reinvestment Act

Advocates Urge FinWise Bank FDIC Downgrade for Predatory Lending

 A coalition of consumer advocates have submitted a letter to the Federal Deposit Insurance Corporation (FDIC) calling for the downgrade of the Bank because of Community Reinvestment Act (CRA) violations. They argue that FinWise Bank’s lending through American First Finance, Elevate, and Opportunity Financial (OppFi), offering loans at up to 160% APR, "raises serious consumer protection issues and fails to meet the convenience and needs of the communities it serves." Under FDIC rules, banks are responsible for risks arising from third-party relationships to the same extent as if the activity were handled by the bank.

The advocates’ comments pointed out that American First Finance has twice as many complaints to the Consumer Financial Protection Bureau (CFPB) as EasyPay, whose partner Transportation Alliance Bank was downgraded by the FDIC in early 2023 because or deceptive acts/practices by a partner, probably EasyPay Finance. FinWise Bank’s partner American First Finance operates similar to EasyPay Finance, providing predatory puppy loans and other deceptive, high-cost loans through retail stores for pets, furniture, auto repairs, and appliances.

Two of FinWise Bank’s other rent-a-bank lenders, Elevate and OppFi, have rates significantly over 50% for charge-offs, a measure of debts unlikely to be collected, showing high-rates of default and the predatory nature of their loans. FinWise Bank, chartered in Utah and FDIC supervised, is one of only a few rogue banks that front for predatory lenders. Most states have interest rate limits to stop predatory lending, but predatory lenders try to evade state laws by laundering their loans through banks, which are exempt from state rate caps.

The advocates submitted public comments evidenced how FinWise Bank partners American First Finance, Elevate, and OppFi have generated hundreds if not thousands of complaints to the Consumer Financial Protection Bureau (CFPB) about: (1) Deception and unaffordable interest rates on loans that borrowers are unable to repay; (2) Receiving loans that they never applied for and identity theft; (3) Improper debt collection tactics, including collecting debt not owed, failure to validate debts, harassment, and abuse; and (4) Credit reporting problems, including incorrect information and failure to respond to disputes and errors.

The letter was signed by Accountable.US, Americans for Financial Reform, Center for Responsible Lending, Consumer Action, Consumer Federation of America, National Community Reinvestment Coalition, NCLC (on behalf of our low-income clients), Public Citizen, U.S. PIRG, and Woodstock Institute.

*****

Read the March 15, 2023 Consumer Federation of America release.