DOJ, CFPB and HUD officials outline priorities at industry fair lending conference – JD Supra

At an industry fair lending conference last week, officials from the U.S. Department of Justice (DOJ), the CFPB, and the U.S. Department of Housing and Urban Development (HUD) outlined fair lending priorities for their agencies. These represent the first remarks by these regulators following the DOJs announcement of its major new Combatting Redlining Initiative on October 22, 2021, and it was the topic of each of their presentations. Although the DOJ officials remarks largely reflected the press release concerning the new anti-redlining initiative, a few new revelations came to light related to both DOJs initiative and the CFPBs general and fair lending priorities under its new Director Rohit Chopra.

DOJ.Keynote speaker Kristen Clarke, the new Assistant Attorney General (AAG) for the DOJs Civil Rights Division, explained the agencys Combatting Redlining Initiative and partnership with other federal and state agencies. She stated that fair lending is one of most significant issues of our time, and that the Civil Rights Division is compelled to tackle this issue [of redlining] head-on because of the widespread practice in the lending industry and the fact that large homeownership disparities still exist in the U.S. along racial, ethnic and national origin lines.

AAG Clarke explained that the DOJs new initiative is the most aggressive and coordinated effort to address redlining to date. She noted that the agency will work with the CFPB, HUD, prudential regulators, and U.S. Attorneys Offices and state attorneys general to carry out its initiative using a whole of government approach to root out redlining practices on a broad geographic scale.

AAG Clarke further explained that DOJ plans to investigate lenders of all types and sizes for redlining practices, including non-depository institutions that now originate the majority of residential mortgages in the U.S, and noted that several investigations are already underway. She also discussed the list of factors used by the DOJ to determine whether a lender is engaged in redlining activities.

Furthermore, AAG Clarke dwelt on the recent Cadence Bank and Trustmark National Bank redlining settlements, stating that the significance of those settlements is not just about the dollar amount, but DOJs goal to repair decades of discrimination. She also noted that redlining settlements can ultimately benefit the health of institutions and their surrounding communities.

AAG Clarke further noted that DOJ seeks to work cooperatively and collaboratively with institutions to address the deep-seated redlining problem and wants to make a positive and lasting impacton the state of fair lending in the U.S. She also noted that the DOJ will continue to pursue investigations and enforcement actions when discrimination is detected in underwriting and pricing in other types of lending beyond mortgage lending, broadly including all types of discrimination acs the lending process and credit markets.

In a separate panel, Jon Sewa rd, who is Principal Deputy Chief of the Housing and Civil Enforcement Section, Civil Rights Division at DOJ, indicated that in the not too distant future, DOJ plans to announce an enforcement action against a non-depository institution. Although the CFPB filed suit against Townstone Financial, Inc., a nonbank mortgage lender, in 2020, the DOJ has not previously pursued nonbanks, so this will break new ground for that agency.

CFPB. Patrice Ficklin, Fair Lending Director of the CFPB, was also a keynote speaker. She began her remarks by noting the profound impact the COVID-19 pandemic has had on low- and moderate-income communities and people of color, and the CFPBs goal to promote equitable and inclusive economic recovery for all consumers.

Director Ficklin proceeded to outline the Bureaus three key priorities under new Director Chopras leadership:

Director Ficklin then outlined the Bureaus fair lending priorities:

HUD. David Enzel, who is the General Deputy Asst. Secretary for Fair Housing, at HUD, also expressed his concerns about redlining practices. He noted that HUD maintains a dedicated team in Washington focused on that topic and that several significant issues are currently underway at the agency. Mr. Enzel encouraged proactive use of second look review programs for both credit applications and low appraisals and close review of advertising practices for intentional and unintentional bias, especially those that are digital and custom-tailored to individuals, which can sometimes be based on race and ethnicity factors.

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DOJ, CFPB and HUD officials outline priorities at industry fair lending conference - JD Supra