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Fair housing & fair lending trends: A look at housing policies and regulations

NCRC Just Economy Conference 2022 —   Recorded June 13, 2022

National Community Reinvestment Coalition General Counsel Brad Blower moderated a discussion of interagency coordination, enforcement action, and regulatory reform in the areas of fair lending and fair housing with representatives of four key federal agencies.

Moderator:

Brad Blower, General Counsel, NCRC

Speakers:

Donna Murphy, Deputy Comptroller for Compliance Risk Policy, Office of the Comptroller of the Currency; Demetria McCain, Principal Deputy Assistant Secretary for Fair Housing and Equal Opportunity, US Department of Housing and Urban Development; Sameena Majeed, Chief of the Housing and Civil Enforcement Section, Civil Rights Division, US Department of Justice; Patrice Alexander Ficklin, Fair Lending Director, Consumer Financial Protection Bureau

Transcript:

NCRC video transcripts are produced by a third-party transcription service and may contain errors. They are lightly edited for style and clarity.

 

Blower 00:00

 

Welcome, everybody. My name is Brad Blower. I’m general counsel at the National Community Reinvestment Coalition, it’s great to see a crowded room. We have a powerhouse panel here, assembled to discuss fair housing and fair lending priorities in the Biden administration. And I will just make brief introductions, because we want to have ample time for content and for questions. We’ll try to carve out 10 minutes at the end for questions from the audience as well. But I’ll start out with introductions.

To my left immediate left is Donna Murphy, who’s Deputy Comptroller for Compliance Risk Policy at the OCC and I’ve known Donna a long time. She’s worked at the Department of Justice, has vast experience in the area of Fair Lending and fair housing, and is expanded that to anti money-laundering and Bank Secrecy Act issues. And just been a wonderful colleague and voice on civil rights over many, many years. So I’m glad she can join the panel.

To her left is someone I don’t know as well, but I hope to get to better. Demetria McCain is the Principal Deputy Assistant Secretary for Fair Housing and Equal Opportunity at HUD. And she assists HUD’s efforts to eliminate housing discrimination and promote equal opportunity, economic opportunities, as well as diversity and financial inclusion. And she joined HUD following 15 years of service with five as President, at the Inclusive Communities project in Dallas. And Demetria has worked is on several nonprofit boards. And we’re really lucky to get her today. So welcome them too.

And then to Demetria’s left is someone I’ve known, probably almost as long as I’ve known Donna. We had the pleasure of working together for a couple of years at the Relman Colfax civil rights law firm. And before that, I kept hearing about Patrice Ficklin, at Fannie Mae, she’s great, you need to finally got to work with her. And so we’ve kept up over the years. And she is the Director of the Office of Fair Lending and Equal Opportunity at the CFPB and was there from the inception. So she really has been a great voice also for civil rights and has stuck it out at the Bureau and made sure that they, the Bureau continues to be a vital agency working on fair lending, and they don’t work on fair housing issues, but they work on stuff that informs fair housing, but certainly on a COA and other consumer protection laws.

And then finally, Sameena Majeed, who I also don’t know that well, but I’ve gotten to know a little bit better over the last couple of weeks as we prep for this panel. And a little known fact, I didn’t realize this, but one of the– Okay. Hopefully people can find seats.

Great. Our panelists are being great ushers. But Sheena, is sorry, head of the Civil Rights housing section, housing and civil enforcement section at the Department of Justice where Donna used to work and Sheena and I, as I said, don’t know each other that well, but she was the law clerk to Judge Kessler on the first case that really wreck recognized reverse redlining the Hargraves case and I had the pleasure of representing the Federal Trade Commission at the time. And John Relman a well known civil rights lawyer represented the Hargraves plaintiffs, and so nice to have you seen that as well on the panel.

So what I’m going to do to start out, given the wealth of knowledge here, and experience and these are vital seminal agencies that deal with fair housing and fair lending issues. I thought I would first give each of our speakers a chance to talk for a few just a few minutes before we get to questions about their agency’s perspective on fair housing and fair lending priorities and what they’re doing about it. And so we’ll start with Demetria.

 

McCain 04:12

Great. Well, thank you. I was an assured church Usher. So I can just tell you, the front row seats over here.

 

Well, greetings. First of all, from Secretary Marcia L. Fudge, whom I think many of you probably know of. So that’s great. I am, as was mentioned, Demetria McCain. As it relates to some of the priorities for hood, specifically the Office of Fair Housing and Equal Opportunity. I want to start with the fact that, as some of you may know, there was an executive order that came out January 21, by the President, as it relates to racial equity. I think most people many people know that. If not, it’s easily accessible on the White House’s website. But what people don’t know quite as much is that that was that that executive order came out January 21. There was also a specific memorandum from the President, to the HUD Secretary even before we actually had a confirmed HUD Secretary on January 26. So just days later, and the real guts of that memo was instructing her to look at all of its programs, as it relates to fair housing, to make sure and make certain that what perhaps the government has done, you know, there’s recognition that state, local and federal government have done really horrible things as as evidenced by the redlining maps that you have outside in the lobby, to make sure that our programs actually are in alignment with fair housing and redressing some of the issues that have taken place previously, to be honest with you.

So with that, we’re really kind of looking at all of our policies, you might have might say, regarding the housing programs that we run, which are run through, you know, several departments such as our Public and Indian Housing Office, as well as our Community Planning and Development offices. So we’re looking at that through those lenses as overall. But more specifically, as it relates to the office that where I sit. Clearly, we’ve heard the Secretary mentioned on numerous occasions, the problem of the racial and ethnic issue on homeownership and the wealth gap, that is top of mind, at HUD, easy to say, I’m sure people have been saying it for years. But the reality is that gap is larger now than it was in 1968, when the Fair Housing Act was actually adopted, so that’s a problem. And so I don’t want to kind of get ahead of what we’re gonna discuss a little a little later on. But that’s important.

Also key is, in March, the Secretary issued a memorandum to all of HUD, I should say, April, perhaps, to all of HUD, making sure again, with that same theme of let’s look at our programs, she issued a memorandum to all of her to say look at your programs, to the extent that they are creating barriers to people who have been involved with the criminal justice system. That’s very important. That’s very top of mine. In fact, my office, I just issued a memorandum to our staff, as well as our local FHIPs and local FHAPs, informing them how in fact, they should be looking at and implementing and enforcing the 2016 guidance that our Office of General Counsel issued, as it relates to how HUD housing providers interact with people who are attempting to secure housing when they have had past instances of arrest or criminal convictions.

So that’s really important and is really top of mind. I also want to mention that. In addition to that, we’ve got a lot of issues that have been in the news, let’s say, I don’t again, I don’t want to get ahead of the questions, but issues as it relates to the intersection of housing and environmental justice is top of mind as well. And I probably have exceeded my three minutes because Brad’s looking at me. So I’ll leave it at that. Happy to be here.

 

Blower 08:24

Thank you, Patrice.

 

Ficklin 08:27

Thanks so much, Brad. Thank you to everyone at NCRC for inviting me to be part of this august panel. And we do go way back. And so it’s a pleasure to be here. And it’s pleasure to be with all of you. And I want to thank you for what you do every day and the communities that you serve in your work.

The Consumer Financial Protection Bureau works to ensure that individuals and communities have fair, equitable and non discriminatory access to credit. So we’re on the fair lending side of things although, as Brad was saying at the outset, that certainly does relate to fair housing. And we do this through supervision and enforcement activities, as well as research and market monitoring activities as well as rulemaking and guidance, Amicus activity and even consumer education activities. We address lending discrimination by enforcing two laws principally, but there are others as well. The Home Mortgage Disclosure Act, the Equal Credit Opportunity Act, as well as the Dodd Frank Act, Consumer Financial Protections Act ban on unfair, deceptive and abusive acts and practices are some of the tools that the CFPB uses to address discrimination in lending.

We recently released an advisory opinion, which is one of the tools that we use to affirm that the discrimination of protections and protections against discrimination and lending don’t just end once you take out credit, we actually set in our advisory opinion that even holding an existing open account, you’re still protected under the Equal Credit Opportunity Act from experiencing discrimination, whether it’s in having a line of credit abroad li extinguished or reduced, or perhaps it’s in servicing, when you may run into trouble being someone you’re working with maybe in default on a loan, those discrimination protections don’t end simply because you’ve already taken out credit. It’s surprising, but that’s actually an issue that we’ve been weighing in on in the courts. Because believe it or not, some folks thinks that’s a question.

Hot off the presses at 1pm today, we released on our website, an education tool, it’s called the beginner’s guide to accessing HMDA data, Home Mortgage Disclosure Act data. And I think most of you are aware that the Bureau does enforce the Home Mortgage Disclosure Act, we’ve brought enforcement actions against institutions that have not fulfilled their obligations to collect and report mortgage lending data. But this tool that we released today is a tool that many of you may find useful, because in plain language, we walk you through how to actually take home the data and analyze lending activity in your own communities. It dawned on us, and maybe I was helpful in this since I am not a tech expert, that many folks don’t know how to actually create a pivot table and leverage hummed the data. I figured I’d get a laugh on that, a few folks that can commiserate with me. And so we actually had been doing tutorials, and I was sending members of my team around the country to speak at conferences, to work at help desks, we did help desk at a prior one of these conferences NCRC conference. But we thought what if we actually posted this tool on our website, so it’s live was just released today. And we have some contact information there if you still need help or assistance. But we hope that that tool makes these data more accessible to everyone. Because after all, the publicly available data are in fact the people’s data.

We’re spending a lot of time also looking to the future, the future of financial services markets. I understand there was a wonderful panel that I missed earlier today that was focusing on artificial intelligence, and machine learning. Well, that’s an area where the Bureau’s focusing as well. And we’re thinking about this future world where lending is shaped by predictive analytics, algorithms and machine learning. I think many of us are aware of how much of our data are being gathered and how much surveillance is going on on our activities as consumers. Sometimes it’s kind of creepy when your phone starts suggesting things to you based on something you thought about, and you didn’t think it actually searched. But in any event, maybe it’s gotten that maybe it’s gotten that intrusive. So we’ll be sharpening our focus on digital redlining, including algorithmic bias, as more technology platforms, including big tech firms influence financial services marketplaces, we at the CFPB will be working to identify emerging risks and to develop appropriate policy responses. And so our work not only covers individuals, but we also protect businesses from discrimination. And so we do quite a bit of work in the area of small business access to credit, as well as discrimination against small businesses when they’re attempting to access credit. And so stay tuned to that space. We’re in the process of a rulemaking that actually relates to creating a regime like HMDA for the collection and reporting of small business lending data. So with that, thanks.

 

Blower 13:11

Thank you, Patrice. I would just add before the next speaker, that as someone who also has trouble with pivot tables, and technology, sometimes, the NCRC has a fair lending tool that our members get access to. And so you should check that out that really allows you to dig in by MSA and really look at fair lending patterns within those areas. Our next speaker that I wanted to give an overview is Donna.

 

Murphy 13:38

Thanks, Brad. And good afternoon, and welcome to all of you. I really appreciate Brad and the NCRC team inviting me to participate on this panel today, because this is an issue that’s been near and dear to my heart for a long time. And I’m really glad to see all of you here and hopefully we can have a great discussion.

I am Donna Murphy as Brad said and I currently am responsible for fair lending policy among other issues at the OCC to the Office of the Comptroller of the Currency. For those of you who may not be familiar, the OCC is the regulator and supervisor of the national banks and Federal Savings associations. So in addition to our responsibility to supervise those banks for the Fair Housing Act, and for the smaller banks, the Equal Credit Opportunity and Home Mortgage Disclosure Acts, we also have a mission and our mission is to ensure the safe and sound operations of those banks to ensure that they provide fair access to credit and treat their customers fairly. And we take that very fairness mission very seriously.

The acting comptroller Michael Hsu, who’s been with us for a little more than a year now from his first days in the in office made racial equity and addressing the racial inequity in the banking system one of his top priorities. So I’m gonna take a few minutes just to highlight a couple of the things that the initiatives that we’ve been working on and are continuing to work on. Because that is a big, big task and challenge. And one of the things that the Acting Comptroller has said is that we are very focused on moving forward on this expeditiously because in these changing economic times, it is we are trying to make sure that the cap the communities that all of you serve, that have the least access to capital and at least access to credit do not end up bearing the whole burden of the economic uncertainty.

So one of the things that we’re doing that most probably directly related to this panel, is we have been re examining how the OCC deals with fair lending enforcement. Some of you may be aware that last year, there were two redlining cases that were brought based by the Department of Justice and CFPB. There are lawsuits based on OCC referrals. And at the same time that those cases were brought, the OCC also imposed what we call civil monetary monetary penalties, basically fines on those banks. First time in decades that the OCC has taken that kind of simultaneous action with our fellow regulators. And we are we are continuing to look at how we can most effectively not only identify and refer violations when we find them, but also to send the message that it is, you know, a united front among the federal regulators in terms of enforcement.

And those those referrals and others that, you know, the OCC makes, are really a result of efforts we’ve been making for the last several years to enhance our fair lending supervision. We have more than 1000 banks that we supervise at the OCC and every examination cycle, the OCC does what’s we call a fair lending risk assessment in those banks. And we have recently implemented really upgraded our tools for doing that so that we are consistent, and metrics driven across those across those banks across all those banks that we supervise. And we’ve also enhanced them and really worked hard to strengthen our screening of the annual hummed data, which we also do to in order to identify the areas of highest fair lending risk. There’s many other aspects to that that are sort of internal, but it’s the OCC and I don’t have time to get into all of them now, but this is something that’s a focus for the comptroller Comptroller Hsu. And we are going to continue to work on strengthening that program. branching out just a little bit. Comptroller Hsu has been very active in some of the interagency efforts that that Demetria mentioned, including, I think leading some of the commitments that were made by the federal banking agencies with regard to the property appraisal and valuation equity Task Force paid. Yeah, I’m working hard on that using all the acronyms. And we’re gonna talk a little more about that later. But that’s he’s been he’s been very committed to that and the agency has as well.

We also are expanding and continuing to support the efforts in what the OCC calls project reach. It’s a group of banks, other financial industry participants, civil rights and community groups that the OCC convened in three work streams and continues to do so. Those work streams focus on affordable homeownership promoting that and expanding and encouraging alternative and expanded credit for folks who currently are either credit invisible or underbanked. And also in revitalizing and supporting minority depository institutions. With regard to that last piece, there’s a number of efforts underway. But one thing I did want to mention is that we were very proud and pleased that last month, we the OCC issued a charter to the first new national bank, that’s NMDI. It’s a woman owned and led institution in Texas. And that’s the first time in 15 years. And we’re very glad, very glad to be able to say that.

So, one other two other initiatives I wanted to talk about. One is last month, Comptroller Hsu convened the first of a series of financial health roundtables. This is an effort to the OCC to reach out to the community and initiate and further discussion about how we can not only the OCC, but the federal regulators that we work with helped to promote financial health among all consumers. And the first one actually was very interesting topic because it was this a discussion of minority ownership of So currency, lots of issues to talk about there. And it was just the big, you know, the beginning for us at least have a discussion.

Finally, and I’m not going to get into too much detail because you all just heard the the real principles and decision makers talk about CRA. It is a major, major focus of our agency in terms of taking CRA into the the current era and the future so that we can expand access to credit, investment and basic banking services in LMI communities and for LMI people who need them the most. So with that–

 

Blower 20:37

Thanks, Donna. Appreciate that. Finally, Sameena.

 

Majeed 20:39

Yeah, I’ll be quick. Good afternoon, everyone. Sameena Majeed, I’m the chief of the Housing Section in the Civil Rights Division at the Department of Justice. I’m delighted to be here at this conference with you and in person, and just really impressive schedule and list of events. So really excited to to attend some of those other sessions.

Brad asked just to give a couple of minutes of summary of the priorities that the department has in the area of fair housing and fair lending. And many of them will sound or touch on some of the topics that Demetria and Donna and Patrice have shared with you. But if I had to distill it, sort of to one kind of key priority, one sentence, it would really be addressing systemic race and national origin discrimination in both housing and lending, building on the executive order that Demetria referenced early on the federal government’s long history of participating in creating residential racial segregation.

The Attorney General and the Assistant Attorney General Kristen Clark, have committed themselves to redoubling resources to addressing redlining, in particular, and we’ll talk a little bit more about that. But just want to mention that in October, the Attorney General flanked both with the director and the comptroller announced the department’s combating redlining initiative, it will be an is the largest and most aggressive effort to combat redlining. It will use and build on the work of US Attorney’s offices across the country. So the geographic reach is unprecedented. We already have numerous investigations that are open across the country, and as Donna mentioned, have filed two pattern or practice redlining cases, one in Memphis, another in Houston to redress redlining in black and Hispanic districts in those areas. We’ve obtained $10 million in relief for those communities, new branches in redlined communities, loan officers, advertising, community partnerships, etc, we’ll discuss a little bit more about what those remedies might look like. But that’s an example of a terrific partnership with the OCC because, as Donna mentioned, those are OCC referrals building on the expertise of the OCC and together with Patrice’s shop, we filed against TrustMark, and did that in partnership and the CFPB got millions of dollars in penalties as a result of that. So a big priority race and national origin in housing and lending. It’s gonna look focused a lot on addressing redlining in the in the year to come.

I want to say though, that that is not the only way the department is addressing historic patterns of racial segregation. We are looking hard at the intersection of criminal justice and housing. We know that disparities in the criminal justice system perpetuate racial segregation. And just to give you an example, I’m not telling you something you don’t already know. But jurisdictions adopt crime free programs, crime free ordinances. These are programs that require ordinances rather that require landlords or housing providers to evict tenants, for example, on the suspicion of criminal activity, often times, no conviction is required. It could be a domestic violence call, for example, we to give you an example, we’re filing a we actually we were litigating a case in against the city of Hysperia in California that involves such a crime free housing program and so stay tuned for more activity in this space. And that’s just one example of kind of the intersection of criminal justice and housing that we are, are focused on.

I would be remiss if I also didn’t mention the significant work that DEP has done and will continue to do in the space of sexual harassment and housing. I think many of you are familiar with this problem. You know, you’ve got a landlord predatory landlord that preys on some of the most vulnerable women and tenants out there, single moms who are sometimes on the brink of homelessness, sometimes it’s escaping domestic violence, just trying to put a roof over their head and subjected to predatory and sometimes criminal sexual conduct by landlords are owners or maintenance workers. And so we have been very aggressive in the space in the last few years, we filed 24 pattern or practice cases, obtain $10 million and relief for victims. And most importantly, our consent orders require the harasser to be out of the business and stay away from the women. And I want to I want to compliment HUD on this too, because we’ve we’ve been joined at the hip for for many years on the sexual harassment work, but it’s righteous work, and it’s work that we’re going to continue. And so with that, I know I’m over my three minutes, but we’ll turn it over to Brad.

 

McCain 26:14

Can I add one thing? I invite all of you to look at HUDs table talks there, you can actually hear and see Assistant Attorney General Kristen Clark, talk about some of her own experiences in her work at the Department of Justice with our own general counsel. Damon.

 

Blower 26:33

That’s terrific. Now, can I just say out just at the outset that I mean, after we’ve heard this, it’s so nice to have an administration that is committed to the fair lending laws and enforcing them vigorously. So I, first of all, wanted to just start out with some appreciation there just during the list of activities that sorry, that your agencies are working on, it really warms my heart.

 

Majeed 26:56

Oh, yeah. We have to make up for lost time.

 

Blower 27:02

And I would, I would be remiss if I didn’t mention that we NCRC does have one complaint pending note no pressure Demetria. With with HUD on the criminal justice issue, and how that has impacted a bonafide in terms of being able to get rental rent an apartment because she had a minor offense and years later, it was used to deny her rental. So that’s an issue that’s ongoing that we’re working on.

So this is great, we have a bunch of topics we want to get to probably not going to get to all of them, given the time we have but we’ll we’ll jump on in. We touched upon. The speakers touched upon a little bit how they coordinate together. But I’d like to dig in a little bit more. And discuss a few examples because I don’t think the audience, they may know of what one or two of your agencies do on their own. But I don’t think there’s always an understanding of how closely the agencies need to coordinate, particularly now that we’re, as Sameena said, digging in and making up for lost time. So I wondered if you could talk a little bit about some of the joint efforts that you’ve already mentioned, like the Trustmark enforcement matter, combating redlining, PAVE, open it up to the to the panel to talk about some of those joint efforts and how you coordinate to be efficient.

 

McCain 28:16

Sure, well, I’ll start out if we want to talk about PAVE. Now that doesn’t explain what it means, so just to make sure people get it. It’s the property appraisal and valuation equity Task Force, right. And so that task force included all of the agencies that you see here at the table, as well as paid others to really address the problem as it related to discrimination as far as valuations of homes, right, not just new homeowners, sometimes people will try to refi as well. And so the task force was led by the Domestic Policy head, which is Susan Rice, and co chaired by Secretary Fudge, and with the help of HUD staff, we’ve actually staff that up and let that work over the period of time. And that work continues. They came out with an action plan, not saying that’s the answer to everything. But it’s a plan of what steps would take place next. And that group converged for over about a year now actually, because it kind of was kicked off by the President during the 100th anniversary of all the horrible things that happened on Black Wall Street. And so that work is continuing. But it’s across several agencies, which is a little tough. You might say it’s kind of herding cats a little bit.

 

Murphy 29:36

Not just a little bit. To be truthful. So I’ve been a civil servant for a very long time. Thanks, Brad for not saying exactly how many years ago he met me, but I have– I will say unequivocally the PAVE taskforce was the most effective interagency process that I’ve ever been involved with. It was 12 different agencies that came together to produce this report because this problem is so severely systemic and so deeply rooted in our housing system from the decades of discrimination and segregation and redlining. And so, I mean to me, you know, it’s it. We haven’t solved it yet. But we’ve got an action plan that has really great items in it really great plans, all the agencies that as far as I’m aware of moving forward on it, it’s it’s really, I mean, I think that it’s hard to understand if you haven’t been inside the federal government, how remarkable it is to have 12 agencies agree on a plan to do something as difficult as that. So I just want to I think that the folks at HUD who led this did an incredible job. So I want to give them a round of applause.

 

Ficklin 30:48

Well, I’ll just jump in and say that not only did we enjoy participating in the outstanding work of being part of pave, in addition to that some of the work that the CFPB does is to coordinate very closely on enforcement actions as both Donna and Sameena mentioned before, redlining is a priority for the CFPB as well, and we do coordinate closely with our sister agencies around our redlining work. We also coordinate though, on joint efforts that may influence policymaking, and so I’ll just throw out as an example, we actually were concerned that the Appraisal Foundation, which is in charge of promulgating the standards that appraisers use to appraise real property. We were concerned that the way in which the standards were framed and phrased may not effectively convey the fair housing and fair lending requirements that apply to appraisal activity evaluation activities.

And so we were pleased to lead the effort with our sister agencies, including the agency sitting here at this table to jointly send a letter to the Appraisal Foundation, expressing our joint concern, I think that one took a record of maybe about nine months to negotiate the language of that interagency letter, sometimes every word. Think maybe in terms of shortness of brevity, but that’s what I meant the other way, not in terms of length of time. That was with working with alacrity. But it’s been a very important letter, and and we remain in dialogue with the Appraisal Foundation in strengthening those standards. Another example is a joint letter that the CFPB lead with regard to encouraging the use of special purpose credit programs, with all of these agencies as well. And some of you may or may not be familiar with special purpose credit programs, but it’s an authority under the Equal Credit Opportunity Act, that allows lenders to designate a program with the appropriate research that has to be done in advance. But to designate a program to focus on an area that is underserved, an area where their traditional lending guidelines may disadvantage a particular group of borrowers. And they can create a special lending program or special features that are targeted by demographic characteristics, which are normally prohibited under the ECOA. But to the extent that these programs are actually premised on those types of deficiencies or shortfalls in terms of current lending, they are in fact legal under the Equal Credit Opportunity Act and Regulation B. And so it was a fantastic opportunity to have all of the agencies speak with one voice, encouraging Special Purpose credit programs as an effective tool to help advance racial and economic equity. So those are just a couple of examples of some of the things that we’ve done in collaboration with our partner agencies.

 

Murphy 33:38

If I can just maybe provide a little context here. One of the reasons that interagency efforts like these are so important is because fair lending supervision enforcement responsibility is divided up among a number of different agencies in the in the US federal government, there was actually a GAO, they weren’t called the General Accounting Office back then they were called something else. But they were GAO did a study, I think, like in 2008, that actually laid out exactly how complicated the fair lending and fair housing enforcement systems are. And it’s so that makes it so critical, because if the agencies aren’t working together, then lots of things can fall through the cracks. And so these kinds of informal, they’re really informal in a way efforts that we’re talking about are critical. There’s also the Fair Housing Act actually provides for an ongoing interagency fair lending taskforce that meets every other month at the staff level. It’s just so important that we are all in contact with each other and are working together. Because when we don’t, and there have been times during the when, when that doesn’t happen, then it’s really difficult to make progress and get things done. So these kinds of efforts led by HUD and CFPB are really just so important to this effort.

 

Majeed 34:55

I just I’d add one thing on the enforcement and DOJ is primarily enforcement agency so isn’t engaged or isn’t certainly in a leadership role, like the CFPB and HUD are on the on the policy side. But DOJ and the bank regulatory agencies, as well as HUD, work in tandem on on referrals, the Equal Credit Opportunity Act mandates that if any of those agencies determined that there’s reasonable cause to believe that there’s a pattern or practice of a fair lending violation, they send it over to the Department of Justice, then we look at it and then we file suit if we think that it rises to that level. And just to give you kind of a sense of the numbers, I think, in the last 20 years, all told the bank regulatory agencies have sent over nearly 500 matters against banks, and about 160 of them are race and national origin pattern or practice matters. So there’s a lot of enforcement activity that results from that collaborative relationship and the referrals from the agencies over over to the department.

 

Ficklin 36:02

And I’ll just add that in addition to referrals, sometimes we will work jointly with the Department of Justice on an investigation from the beginning. And so we’ll work jointly together to develop evidence to send in undercover testers, which is always the most fun part to me. What did they learn? And how are they treated? You know, and to do that kind of work together and collaborate on it from the very beginning, which has been, I think, some of the most gratifying work I’ve done in my career.

 

Blower 36:27

One of the things I wanted to ask to follow up on the appraisal bias issue is I know Sameena, the Department of Justice had doesn’t often do this, but has been doing this a little bit more frequently lately. And that’s you could file a statement of interest and actually an active piece of litigation where the public interest is involved. And I wondered if you could comment briefly on that in Tate Austin.

 

 

Majeed 36:49

Yeah sure. So a statement of interest is like an amicus brief, that the department or another agency can file in an already existing private case and this, and we use this because it’s a it’s an important way to signal to the court and to the industry, what the law is and what the what the what the requirements, at least as the Department sees them should be. So Brad mentioned, Tate Austin. Some of you might be familiar with this, this set of facts. But let me just give you 30 seconds on this, a black couple in Marin County, Paul Austin and Tanisha Tate Austin, in March 2020, were seeking to expand their home because who wasn’t they needed more space as pandemic and people were, were trying to, to remodel and get more space. And so they were seeking to refinance that home now that San Francisco area, very expensive area, they have recently refinanced that home and the appraisal had come in at about ~1.45 million. So within, you know, six to eight months had already received an appraisal, but I needed to do it again, because they were going to build an addition. And so they contacted a company and appraiser came Paul Austin met the the woman, Jenna, Jeanette Miller, who’s the appraiser walked, you know, walked her around the house. And lo and behold, the appraisal came in at 995,000. So, more than or about $500,000 less, 50% Less. So, clearly, something’s going on. Because, you know, seven, eight months earlier, it was 1.4 8 million. So I think, you know, they were smart, they were wise to it, they called a white friend to come over and they were going to do it all again. They engaged in the very painful process of whitewashing the house that is taking down family photos, removing any indication of memories of life of of who you are as a person of your kids. And, you know, the white friend met with appraisers, same company, but different appraiser. And the amount this time was 1.482 million. So back up a little bit more than that first initial appraiser $500,000 more. So that that’s that’s the fact pattern. And so they filed a lawsuit in California. And the defendants moved to dismiss saying appraisals aren’t covered under the Fair Housing Act. And so we filed a statement that said yes, they are says right here, 3605, clear as day it says in the regulation, and not only are appraisals covered, but appraisers are covered as defendants. And so here are the legal standards that should apply. The good news in this is that the court agreed with us, agreed with plaintiffs, and so denied the motion to dismiss, but that case is ongoing. But I will say this is this is not an isolated situation. There are news reports everywhere about it. And there’s more than news reports, there were studies. If you look deeper into the data, that control for certain factors and show that black homes or in predominantly minority areas are significantly undervalued, undervalued, even lower than the contract price vis a vis white homeowners, so, big problem. And long way of answering Brad’s question is why are we– Why did we do that? We did that because it’s, it’s important for the Department and others to send the message to the appraisal industry, that appraise appraisals are covered under the Act, appraisers can be liable, and that it can be a fair housing act violation.

 

Blower 40:57

Thanks, now that I mean that I wanted to highlight that, you know, because in this era we live in now, even though those of us who practice in the Fair Housing Act, area felony Act, or fair lending area, know that appraisals are covered. Sometimes we have to reaffirm that with courts, and instead of getting potentially bad precedent in a district court that could then ripple all its way up to the Supreme Court and maybe get some weird ruling, it was very important for the Justice Department to step in. And kind of nip it in the bud and remind the court and the litigants. So really appreciate that.

Wanted to turn to the CRA. And I know we there are other panels on this. And some of the speakers at the luncheon spoke to CRA but I wanted to put Donna on the spot for just a second. She’s a friend so I can do that.

So two things about the notice of proposed rulemaking for on CRA modernization that I wanted you to touch upon, that are very important to our members. And one is a concern that under the pre existing CRA rule. And the way it’s implemented, there’s a lot of grade inflation and lenders get an outstanding even though they may have fair lending issues or so we wanted to make sure that the rating system is fair. And I know there’s not as much inflation as there has been historically. And the other thing is, I wanted to get a sense from Donna and I know that Marty Greenberg touched briefly upon this at the luncheon speech, to what degree our race and ethnicity or gender are incorporated into the NPR, the NCRC and the Relman Colfax firm authored a white paper that we thought that it was constitutionally allowed to collect not only collect the information as part of the updated rule, but also to use it in performance metrics and ratings. So but curious, Donna, what’s your take on both of those issues that are important to our members?

 

Murphy 42:48

Great. So Thanks, Brad, for that question. As those of you who were just in the last plenary session know, I could talk a lot about CRA and say a lot of different things about what the proposed rule that is out there now would do. But the main thing, the first thing I want to emphasize is that this is a proposed rule, and we put it out so that we can get comments we can get we want concrete, specific comments from as many people as many stakeholders like you, and across the spectrum of stakeholders who can tell us how to improve it, tell us what we got, right, what we got wrong, what we should change. And so with respect to the rating system, that is something that we’re well aware of, we’ve taken a number of potential steps in this proposed rule it to try and make the system more quantitative and metrics driven to have specific performance standards across the board that would provide for a more consistent evaluation of banks and also allow for the calibration of that system to ensure that only the banks that perform the best received the Outstanding ratings. I will say that this sort of crosses over between your two questions, one, and there’s measures throughout the throughout the proposed rule that try to do that, that try to get to the to the more specific more concrete more standards and metrics based approach, while still allowing for the kind of qualitative judgment that needs to happen in in case of particularly specific community development activities, things like that. One of the things that we that the proposed rule also would do is to expand currently, the rule provides that if a bank is found to have engaged in discriminatory or other illegal credit practices, that their reading can be downgraded. There’s lots of examples where the OCC and the other agencies have done that, based on findings of fair lending and other new data and other violations. But currently, the current rule refers specifically to credit practices under the proposed rule that would be expanded so that it would also encompass other banking practices that impact on consumers and small businesses, specifically practices related to deposit accounts and things like that. So that’s a proposal under the rule that we’re looking for comment on.

With respect to the question of race more generally, we are all very, very much aware of the history of CRA of the fact that it was enacted, along with the other civil rights statutes to try and address the impacts of many years of segregation and redlining. However, this the Community Reinvestment Act, the law does specifically use non-race-based standards of low and moderate income to focus the actions under that statute. Currently, under the law, and under the statute, and under the regulations, the legal departments of all three of the agencies that are responsible, the OCC, the Federal Reserve and the FDIC have and continue to analyze extensively the ability to incorporate more specific racial race based or ethnicity based metrics and standards. As Brad noted, the NPR does not incorporate those metrics and standards. But we welcome comment on that. And it does provide for the NPR does provide, as I think, Chairman Greenberg mentioned, for additional disclosures, and transparency related to home to data, it continues the current the current prohibition against illegal discrimination in the creation of assessment areas. And there’s a number of other measures that are intended to sort of be part of that whole package. But it’s an area that we’re still working on and looking for comments on so that we can consider them and in the creation of any final rule.

 

Blower 46:57

Thanks, Donna. And I would encourage everyone in the room and our members to read the NCRC white paper, it’s on our website, to read our initial analysis of the NPR, where we encourage you to put in comments that address inclusion of race and ethnicity. I wanted to turn to Special Purpose Credit Programs, which were touched upon earlier briefly. And I want to start with you, Patrice. To some extent, all the agencies at this table have voiced support for targeted programs that address the history of racism and underserved communities in targeting lending to special in terms of special purpose credit programs. So Patrice, I wanted to start out with you. The CFPB has really been at the at the forefront of analyzing this issue and discussing how this can be done in a compliant way with the Equal Credit Opportunity Act. Could you talk a little bit about that?

 

Ficklin 47:53

Sure. I’d be happy to, as I mentioned a few moments ago, the CFPB has for some time and really trying to encourage financial services providers to consider special purpose credit programs as a way of better meeting the credit needs of underserved communities. And in addition to the February joint statement that I mentioned a few moments ago, I also wanted to call out the fact that in December of last year, HUD, Demetria’s colleagues, issued an opinion affirming that special purpose credit programs that pertain to mortgage lending, as long as they are compliant with ECOA and regulation B generally would not violate the Fair Housing Act. And so it’s worth a read for more specific details around that. But that was an important area where I think folks were looking for HUD to speak. And so with regard to Special Purpose credit programs, we’ve really been encouraging lenders to look hard at ways in which some of the history of including government sponsored redlining and discrimination, as was mentioned earlier, by both Demetria and by Sameena, continues to perpetuate itself, and looking at communities that are underserved, particularly in areas where they are, in fact, doing business. And so I believe there is a mention of special purpose credit programs in the NPRM if I’m not mistaken for the Community Reinvestment Act that Donna mentioned a moment ago. So that’s an interesting area of intersection, where special purpose credit programs might also potentially qualify for CRA consideration potentially CRA credit as well.

And so, as I mentioned a moment ago, ECOA and regulation B, allow a for-profit lender to make a determination that there’s a need for a special purpose credit program and to deem a program such based on their own assessment. And at our website consumerfinance.gov we have more specifics and advice about what the law requires in terms of establishing a special purpose credit program, but the program has to be established and administered pursuant to a written plan, there needs to be analyses that are conducted in advance. Using data, sometimes 100 data other publicly available data can be used to support the establishment of a special purpose credit program. And we’ve seen a fair amount of interest in special purpose credit programs, particularly in the small business lending area, and in the mortgage lending area. So with that, I didn’t know if there was anything else you wanted me to speak to specifically, Brad, on special purpose credit programs?

 

Blower 50:28

No, just that, you know, there’s certainly been the regulatory regulators have opined in unison, that lenders should be doing this and yet, there’s still some reticence in some sectors of the industry to do this. What do you see as ways that in addition to what you’ve already done in providing guidance that we can get better traction in the industry for these kinds of programs? Sure.

 

Ficklin 50:51

I think probably the most important way is for lenders that are considering these programs where the for profit or not for profit lenders, is to get in touch with their primary regulator. We at the CFPB, have had a number of institutions reach out to us to discuss their ideas and their plans for special purpose credit programs, we welcome those invitations, gives us an opportunity to hear what they’re thinking. Even though the determination around what is a special purpose credit problem was made by the lender and not by us, it does give us an opportunity to potentially flag any potential red light flags or provide red flags as well. And I’ll say that we’ve had a number of lenders take us up on that. And we’ve heard some really interesting proposals and exciting ideas from the lenders that are under our jurisdiction with regard to their their efforts to better serve the communities in which they reside in which they do business.

 

Murphy 51:46

And if I could just add on to that. Patrice mentioned, the primary regulators, in this case the OCC, Federal Reserve and FDIC Are those at the federal level. And we also at the OCC have a number of banks that either have special purpose credit programs that they have in place right now, a few are sort of long term, most of those are in the small business area. But there’s a couple of new ones that are related to homeownership programs. And we are, we obviously have joined with the other our fellow agencies in terms of encouraging banks to, to consider those programs to look into them, we very much encourage banks to come and talk to us into the their exam teams and to the the agency, if they’re considering it so that we can do essentially the same thing that Patrice was just describing, which is provide input and feedback. However, under the regulation and the statute, we cannot approve a program. So that may be think maybe a little bit of the hesitancy of there’s no official stamp of approval a bank can get for that. So one of the things that the OCC has done is we’ve encouraged the banks that are participating in Project REACH, the affordable homeownership workstream. They gotten together, and they are talking amongst themselves and with some of their community partners about establishing Special Purpose credit programs. And it does seem that being able to sort of, you know, sort of work together within the bounds of you know, requirements like antitrust, right, they being able to share information and exchange ideas, seems to be a welcome tool and a welcome approach for many of the institutions that are considering it. So we’re hopeful in that regard as well.

 

Ficklin 53:30

And I just thought I would build on what Donna was saying. But just sometimes I worry at these conferences, I feel like sometimes I’m speaking regulator-ese — Just to give examples of some special purpose credit programs that we’ve seen. So for example, we’ve seen a program that was a small business lending program for minority owned businesses. Now you would normally think that a program that’s limited to minority owned businesses would run afoul of ECOA’s prohibition on discrimination. But if it’s properly established pursuant to the special purpose Credit Program provisions, you can have such a program. And so that’s those are the types of things that we’re talking about. We’ve seen a mortgage lending program that was limited to individuals with income below certain thresholds, or buying properties in in majority minority areas, for example. And so those are those are the types of programs we’re talking about when we talk about SPCPs or special purpose credit programs. So hopefully, that’s helpful.

 

Blower 54:21

Very helpful. And certainly in this era where we’re not seeing Congress pass, like the Build Back Better legislation that included downpayment assistance. It’s more and even more important that there’s private capital that’s being applied to to this program. And so I’m always flummoxed when bankers will occasional and banker will say, Well, I’m not sure the regulator’s have really presented it clearly enough that we can do this and maybe we’ll get sued by a conservative group. And if that’s going to be our standard for leaning in, like I might get sued by private litigants in cuts. I mean, that’s really disastrous for low and moderate income communities. And I also wanted to draw Sameena into the discussion on SPCPS because one of the things I’ve mentioned is How could an SPCP, violate either the ECOA or the Fair Housing Act if in Fair Housing Act settlements, the Justice Department has included, that you will do programs reach out to minorities, and you’ll locate banks. And so if you could touch upon that.

 

Majeed 55:21

Sure. So I think I mentioned that the Justice Department has been active in the redlining space. So we have a number of of cases and consent orders, involving claims of redlining. So as part of the remedy, they’re usually the bank does a credit needs assessment of the redlined areas. And some banks, as a result of that assessment, have implemented or adopted Special Purpose credit programs for residents in majority minority districts that are owner occupied homes. Some of the just to give you an example of this is something you’re interested in are looking for a template, our consent order involving Klein Bank, in Minneapolis, involved, the bank adopted a special purpose credit program. And some of the features of that program included closing cost assistance, included downpayment assistance up to a certain point for residents and majority minority districts included potential potentially an interest rate that was about 50 basis points less than the going rate, included assistance with escrow payments. And again, the sort of class of folks were residents and redlined areas or residence of majority minority census tracts in Hennepin County in around Minneapolis. So Klein Bank is a good example. But there are numerous other examples as well, Union Guardian in Columbus, Ohio, another example of a bank that implemented an effective Special Purpose credit program. And sort of from the compliance side, I mean, one of the favorite parts of our job is to see to see things work. And I think, now while I won’t say it’s the special purpose credit program alone, it’s that in tandem with with the other relief, and the changes that banks have made, that have have led to substantial increase in home ownership for first time, home owners and majority minority districts in a lot of the areas where we have redlining cases. And as my colleague John Seward, who many of you may know, likes to say, it’s a win win. For communities have redlined areas, there’s growth in home ownership for the banks, its growth in business. And so that’s that’s what we’re going for. And I think credit needs assessments and special purpose credit programs are a big part of that sort of Win Win solution.

 

Blower 58:02

Thanks, Sameena. And while you’re up, I wanted to also follow up with you. You touched earlier on some sexual harassment cases, that the department is brought under the Fair Housing Act. And I was really struck when I was prepping for this panel about the number of cases that the Justice Department is brought over the last year since the Biden administration came in. Can you discuss just a few few of those examples?

 

Majeed 58:26

Yeah, I mean, in terms of the sheer number, we launched this initiative in October, I think to 2017, because we knew that it was an underreported problem. It’s work we’ve been doing for decades, but we knew it’s underreported. We wanted to get the word out to community groups, legal aid offices, local law enforcement, and as a result of just the ask, we were sort of inundated. And so was HUD, I think, with complaints. And so we only have authority to bring what are called pattern or practice cases over their multi victim, multi victim cases. And even then, we had, we had so many, so we’ve been brought in the US Attorney’s Offices sort of to act as, as leads on a number of those cases. So there you have attorneys offices are handling many sexual harassment cases, we’re handling it, we continue to handle it. But just to give you an example of sort of one case, we recently filed and resolve the case against Joseph Centanni. in Elizabeth, New Jersey, Mr. Centanni is had been an owner operator of dozens of rental properties in that area and for 15 to 20 years sexually harassed dozens of women and some men as as well and are and you know, the It runs the gamut, you know, requiring sex in exchange for maintenance or in exchange for an apartment. You know, comments, text messages. You know, sometimes in front of children, some of this conduct. So, you know, just really egregious, really egregious conduct. In that case, we were able to obtain a consent order about $4.7 million, I think for aggrieved persons or victims. So there were 50-some victims and probably could have been more dating back to years earlier. But that that’s what a case looks like. It’s often many victims often over a period of years. And the conduct is significant. And egregious.

 

McCain 1:00:32

Can I just add here too — I mean, there are seven protected classes under the Fair Housing Act. I’m sure this audience knows those. So much of this work, actually, we’ve got to think about intersectionality. You know, we had a case very recently, and many of our cases do get partnered with we partner with DOJ and refer those, one such case actually brought about issues related to sex, because under the sex piece, the class, we also recognize gender identity and sexual orientation, right. And so we actually had a case that actually, there was a cross between the, the gender identity as well as disability. And this was a male victim. And so I mean, this, this is huge, unfortunately.

 

Majeed 1:01:24

And and Demetrius mentioned intersectionality, I want to say that in some of these cases, and one of our sexual harassment cases recently, there are both race and sex claims because the landlord preyed on African American women in particular. And then Demetria, that HUD case is now with the department and we are we are progressing with that, with that matter.

 

Blower 1:01:49

Alright, we’re going to turn to a new topic. We have a bit of time left, and we’ll open up to questions in a little bit—

Affirmatively Furthering Fair Housing. And I wanted to ask you, Demetria up, one of HUDs most important obligations is the duty to affirmatively further fair housing and under the into promote that under the Fair Housing Act, I know there’s a rulemaking pending, but wanted to ask you what you’re seeing is some of the promising steps that communities are taking under that.

 

McCain 1:02:17

Sure, we can, and I didn’t mention this in the opening, because I knew we’re gonna talk about this because it’s on everyone’s mind, just like, you know, your work is on everyone’s mind. And CRT is on everyone’s mind, just to level set: Affirmatively Furthering Fair Housing, there’s a duty for HUD and HUD grantees to have probably further free housing. What does that mean? Everybody might not know what they what that stands for. And I’ll say, say it now AFFH for short, okay. So what does it mean to AFFH, essentially, grantees of HUD as well as HUD, have a duty and this is not something new. This was passed in 1968, when the original Fair Housing Act was adopted. Okay. But really, it has been honored in the breach for over many years. So we have a duty to identify the fair housing problems and make a plan and do something to address them. So it’s not just the duty to not discriminate, it’s the duty to go even further, right, recognize what’s going on? And do something, take some steps to do something about it. Okay. And so that’s been around for 1968. During the Obama administration, they passed a rule to actually implement this and put some teeth to it. Unfortunately, in the last administration that was rolled back, we this past summer 2021, we actually kind of push back that piece that the last administration brought forth and brought back the 2015 parts of it, rule. And so what we’re doing right now is redrafting and kind of looking at and refining that 2015 rule. As Donna mentioned, when that is out for public comment, please comment.

Okay, so now to Brad’s question. We actually because we issued the interim final rule last summer, we’re actually receiving some voluntary plans from a few jurisdictions. And we noticed, Brad that the plan I can’t name those wouldn’t be appropriate to name those jurisdictions. But we’ve noticed that the jurisdictions who take seriously the community engagement component of the rule seem to come out with the better identifications of problems and the better ways of potentially addressing those problems. And so, so again, level setting, so these jurisdictions if you’re a HUD grantee, if you’re a housing authority, or if you’re a city or a state that gets funding from us, then you are required to to tell us what your problems are and what you’re going to do about them in addition to the plan that you must submit under your own program plan, okay? So the community engagement piece was huge in 2015. I can’t tell you what’s in our redraft right now, I’m not allowed to say that. But the jurisdictions should take that seriously. And now’s the time for everybody, I think, to be thinking about how they can best engage their communities and have communities, the communities know what the fair housing problems are, right? It’s a matter of getting them convened to articulate that to the powers that be.

 

Blower 1:05:27

I also wanted to touch on healthy neighborhood conditions and climate change. And one of the things that NCRC has been very concerned about is the intersectionality of how people of color are often in conditions of toxic dumps near their homes. Climate change is affecting them. And I know particularly HUD and DOJ have been looking at environmental justice issues and healthy neighborhood issues. I don’t know, Demetria and Sameena, and I don’t know if you could address that issue.

 

McCain 1:05:55

Well, the administration has what’s called justice 40 Right now, which is an interagency, once again, we talked about interagency work earlier, herding the cats. We’re not in charge at this time. But there is interagency work as it relates to Justice 40, which in case, we as HUD is looking at these are like we’re looking at these kinds of things, not just environmental justice issues as it relates to what’s happening in the home. But we also look at things around the home. And the neighborhood is as Brad kind of teed up here. And so that’s really important. There’s a group called WHEJC, it’s the White House Environmental Justice Council, which includes stakeholders like yourselves, who are really kind of working in volunteering, advocating in the environmental justice space. They come there, they convene monthly, and we’ve had listening sessions with them to hear some of their issues. And of course, under the Fair Housing Act, there’s always our enforcement side of our work. There’s the policy side of work, and there’s the enforcement side of the work. So there’s some of the enforcement cases have been in the news that we’re handling right now. I won’t go into details about that. But if people find these types of issues, we always kind of take a look at him make see if we have jurisdiction over them and proceed to investigate if necessary.

 

Majeed 1:07:13

Yeah, I mean, we have a couple of matters that we’re looking at. I can’t say more about it, because they’re not publicly filed. But we are actively engaged in this area. And the Fair Housing Act does cover certain of this conduct. And so you know, if you’ve if you’ve got examples or cases that you’d like to bring to us, we are– we’ve got staff that are looking at this right now.

 

Murphy 1:07:42

If I could just jump in a minute, make a plug for again, for commenting on the CRA Notice of Proposed Rulemaking. That proposal as we put it out last month, would go would– Currently the current CRA rule allows for CRA consideration or credit when a bank is engaged in funding disaster recovery efforts after a flood after a hurricane. It does not provide for that the proposal would expand that to provide for CRA consideration for disaster preparedness, and climate and resiliency, climate resiliency in LMI. communities. So there’s a lot of there’s several questions in the what’s called the preamble, which is like the whole long piece in front of the rule that explains it. And we really welcome comment on whether, you know, whether the the way that it’s laid out in the proposed rule gets it right. Does it go far enough? Does it go too far? You know, because we really see that there is, you know, beyond the recovery piece is kind of, you know, late in the game at this point in time with all the issues that, you know, LMI communities of color are facing with these, with these changes. So, really, you know, and we welcome comments on that as people are able to do so.

 

Blower 1:08:58

I’m gonna ask one last question. And then I’m gonna ask the audience to members to ask a few questions at the end, Patrice. I was psyched to see that the CFPB applied the unfairness doctrine under Dodd Frank to discrimination and it seems so obvious that discrimination is not fair and therefore is unfair. But you can’t you can’t believe the uproar in the financial community. The bank’s like, How dare the CFPB apply unfairness to discrimination? So I’d like you to comment on it and what you’ve been hearing.

 

Ficklin 1:09:30

Yeah thank you, Brad. We were surprised too. It does seem rather logical. It’s, as I mentioned a little while back the CFPB does have jurisdiction over the consumer under the Consumer Financial Protection Act, over lending institutions to identify supervise for and prosecute for unfair acts or practices that are committed by any covered person or service provider, in connection with any transaction involving the offering of a consumer financial product or service and unfairness is defined as an act of practice that either causes or is likely to cause substantial injury to consumers is not reasonably avoidable and is not outweighed by countervailing benefits to consumers or to competition. And what the CFPB said is that discrimination based on group characteristics may be illegal and harmful to consumers. And addressing such discrimination in the consumer financial marketplace, falls squarely within the CFPB statutory mandate to address and eliminate unfair practices.

Seems simple, doesn’t seem controversial, because on fairness, doctrine, unfairness law has been around for quite some time. And so an example that we gave is, you know, under the Equal Credit Opportunity Act, it focuses on credit right, on lending. But what if someone is discriminated against with regard to their checking account or deposit account? That would not necessarily fall squarely under ECOA, but we believe it could be addressed by unfairness. Right? So some of the stories about banking while black and folks being discouraged when trying to access their deposit accounts could potentially be addressed with unfairness. So I’ll just leave it at that. To us. It’s very straightforward, very simple. The law governing unfairness is well established, and that’s the law that that is applicable to discrimination.

 

Blower 1:11:18

Now, it really reminded me– the banking communitys – Some, some I would just say some in the, in the lending community’s response, that this was an overreach by the Bureau. It reminded me of the movie Casablanca, where the you know, the good, the good, the character then says, I’m shocked that there’s gambling going on here. I’m shocked that discrimination is not fair. You know, that was almost like what you’re gonna make that argument to the regulators. Okay. I wanted to open it up to the audience. And right up here, if you could stand up to the microphone.

 

AUDIENCE MEMBER 1:11:45

Hi, good afternoon. My name is Karolina McKinney from Wyandotte Community Housing in Wyandotte. County, Kansas City, Kansas. I have a question. I think it’s on topic might be a little off topic. But I want to hear your perspective about what if anything is being done? And if nothing is being done, how can we address this issue of the big box people entities buying up all these houses and depressing inventory to make housing unavailable? I think that falls squarely within fair and affordable housing. Is this something that is on your radar? Is this something that’s being addressed? I know myself, I was searching for a home, I put in over 22 offers and they were all rejected because people were buying, paying cash for houses and they were being sold by OpenDoor and other investors and in our community. I think there’s one particular block 90% of the block is owned by someone in New York. And it is inaccessible. It just frankly, is inaccessible for everyone that is currently in that community. And some of them are not even listed. They’re just sitting waiting for the appraisals to continue to go up. So that seems it should be illegal. Obviously, it’s not because people are doing it. But what is being done about that.

 

McCain 1:13:06

I appreciate the question. It is something that our secretary, and others in the building at HUD talk about all the time, not falling necessarily in the Fair Housing shop at HUD. But certainly in the FHA shop, which is the Federal Housing Administration, peers of mine in the building are definitely looking at this with a keen eye. To the extent that there are foreclosures that fall into the inventory of HUD, what they’ve been doing right now, under this administration, they’ve very recently within the not last few months, you might say, are making certain that those homes first have opportunity to be sold to nonprofits, who will then sell to people such as yourself, versus the investors coming in and scooping them up. So that’s one example of what we’re doing. And we’re certainly looking at other tools in our toolbox that we can control regarding that type of situation.

 

Ficklin 1:14:00

And I’ll just mention that the CFPB just announced a few weeks ago, our new Office of Competition and Innovation. And one of their focuses is on the activities of venture capital firms and private equity firms, including the practice that you described. So it is something that is very much on the radar screen of our director as well at the CFPB.

 

Blower 1:14:19

I would just say the people are standing up now we’ll try to get all your questions really quickly if you need to leave to go to the plenary session. We’ll just give a couple more minutes. Gregory, go ahead.

 

AUDIENCE MEMBER 1:14:27

Yeah, I have a question about the pay report and appraisal work. First, I want to encourage everybody to read it. It’s a great report. But there’s one serious shortcoming Demetria knows what I’m going to talk about. There’s a discussion of disclosure of appraisal data, and the report says the committee will consider this but they don’t endorse disclosure. Now I’m reminded of John Taylor saying that data drive the movement, and I’d like to suggest that a HMDA for appraisals would do for this industry, what HMDA has done for the mortgage lending industry. So maybe you mentioned that The quantitative research that’s been done Freddie Mac, which is a public agency, they did a study which showed that the display that the frequency with which appraisals come in below contract price is much greater in black communities and other non white communities and among non white borrowers. And I’d like to know, when can we expect PAVE to come out and endorse 100 for the appraisal industry?

 

McCain 1:15:24

I can’t give you a date. And you know that, but I will say the taskforce clearly recognizes problem with the issue of data and actually, is looking at really trying to at least get some data sharing going, as you can imagine that it that it requires a number of memoranda of understanding, as well as making sure PII information, personal identification information is not exposed. It is on our minds, Greg, and you will be in my email box very seriously.

 

AUDIENCE MEMBER 1:16:03

So you’re not promising a date, but you are promising eventually it will be done.

 

McCain 1:16:06

I am promising that we’re seriously looking at.

 

Blower 1:16:09

OK let’s have a quick question.

 

AUDIENCE MEMBER 1:16:18

Okay, awesome. So my question is in a similar vein to hers, but I would like to kind of expand on a little bit. First of all, I’m Will I’m a community organizer with action and see a lot of the work that we’ve done on our housing is kind of in a similar area to what she’s talked about, which is where we’re looking at these, what we would call institutional investors, specifically in the single family like starter home market. And some of the biggest names and those are Progress, Residential, Tricon, Invitation Homes, there’s a number of other key players. And some of the biggest issues with them is that these, these companies are changing the fabrics of communities, specifically communities of color of middle to low income communities, because they are artificially inflating the value of these homes because they pay in cash. And they’re forcing people who could be homebuyers to become renters. And this is furthering racial inequities and access to homeownership. And Charlotte is one of the biggest communities that sees this issue. We are one of kind of like, have a large highest percentage compared to national, but it is a big national issue as well. And while we have been working on addressing it locally, we don’t necessarily know a ton about what is being done nationally or feed, even if it is even on the kind of national radar in terms of how this can be regulated, because there’s has does seem to be some clear discrimination here in the capital that these companies have is not something that is accessible to the residents in the community, and it is pressing them out of it is causing a discriminatory effect and who can access affordable homeownership. So I did kind of wanted to further what she was saying as what is being done on a national level, and how can we become involved in that?

 

McCain 1:17:54

I definitely would have to defer to my colleagues and our FHA office, not my bailiwick per se, beyond what I’ve mentioned earlier, but I’d love to stick around and can connect with you later. So I can connect with you with the right folks. And I’m sure Patrice–

 

Ficklin 1:18:09

And I’d like to do the same thing with you will, and also the young woman who spoke a moment ago as well.

 

Murphy 1:18:14

And if I can put another plugin for commenting on the CRA. There are several provisions in their provisions that try to address not giving credit for bank activities that result in gentrification. And also there’s a, there’s a large discussion in the preamble about how we can distinguish between the kinds of investments and not give credit for them in those kinds of situations, versus for example, bank investment in single family affordable housing in rural areas, where in fact, there’s a desperate need for and so there’s sort of, we’re looking for comments and suggestions on how we can best make those distinctions within the CRA regulations.

 

McCain 1:18:55

Well, let me applaud you for your local look at this. And remember, when it’s time for that AFFH to come to your community that you raise this up.

 

Blower 1:19:04

OK one last question, because I really appreciate people indulging us some time.

 

NIKKI BEASLEY 1:19:08

Thank you. Nikki Beasley, I’m with Richmond Neighborhood Housing Services in California. So my first question is for HUD. How is HUD holding housing authorities accountable for when tenants and their assets are not being properly managed, and there become safety, health issues? And then for the conversation about special credit programs, as a HUD counseling agency, many of the things that were mentioned as far as some of the special purpose income, ability to use downpayment assistance or buying in census tracts already exist. One of the things that we got excited about the special purpose was actually being able to call up race. And have you seen any recommendation on the mortgage side to where race could be a contributor, due to the special purpose programs.

 

McCain 1:20:02

Thank you for the question. My colleagues who are in the Public and Indian Housing office are absolutely looking at this. I don’t know if folks remember a few months ago, there were a couple of really horrifying incidences in Philadelphia and New York, as it related to safety and in housing. And so they are looking at this they have recently I know it’s gone through clearance and review by other parts of Hood, as it relates to some of their inspection kind of processes. It’s on the mind of people on the Hill, because they’ve inquired to us to HUD about this. So it’s a serious issue. And again, I go back to that earlier note that I mentioned earlier about the administration telling us to look at our internal programs. So a lot of this, this discussion has been about what private actors do and don’t do, but it’s important to look at what we do ourselves within the agency. So thank you for that.

 

Ficklin 1:20:59

And I’ll say that special purpose credit programs can be targeted based on race. And so we have seen examples for example of mortgage related programs limited to African American homebuyers, for example.

 

Blower 1:21:11

And we have a whole panel tomorrow on how banks are doing it. I’d like to thank our speakers and their commitment.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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