Fair Housing 2019 Yearly Update

The Fair Housing topics of interest to real estate professionals cover a wide array of topics, such as discriminatory advertising, discriminatory lending, and design and build issues. The Fair Housing cases retrieved from December 2018 to December 2019 primarily focused on discriminatory lending. Over the past twelve months, Fair Housing issues were identified in eight cases.

1. City of Miami Gardens v. Wells Fargo & Co., No. 18-13152, 931 F.3d 1274, (11th Cir., July 30, 2019) 

The City of Miami Gardens was unable to prove that it suffered an injury as a result of the alleged redlining and reverse redlining by Wells Fargo. 

The City of Miami Gardens (“the City”) brought action against mortgage lender (“Wells Fargo”) alleging that, through practices of “redlining” and “reverse redlining,” it had engaged in discriminatory or predatory lending in violation of the Fair Housing Act (FHA) between 2004 and 2008. The City did not allege that it had received such loans from Wells Fargo. Instead, it asserted that Wells Fargo engaged in both “redlining—the practice of denying credit to particular neighborhoods based on race—and reverse redlining—the practice of ‘flooding a minority community with exploitative loan products’— by ‘refusing to extend mortgage credit to minority borrowers…on equal terms as to nonminority borrowers’ [and by] extending mortgage credit on predatory terms to minority borrowers in minority neighborhoods in Miami Gardens.” The district court dismissed the initial complaint without prejudice and instructed the City to detail “(1) how Miami Gardens is injured, (2) how that injury is traceable to the conduct of each Wells Fargo defendant, and (3) how the injury can be redressed with a favorable decision in this case.” 

The City amended its complaint twice.

The court determined that “the undisputed evidence confirmed that none of the 153 loans originated by Wells Fargo [within the limitation period] foreclosed.” The City could therefore not have suffered an injury as a result of any of these loans. The court held that the City failed to establish standing¹ and failed to establish that it would be unfair to require it to establish standing under the standard ordinarily applicable at summary judgment. Therefore, the court vacated Wells Fargo's summary judgment and remanded with instructions to dismiss for lack of subject-matter jurisdiction.

^{1 “Standing” is the legal right to bring a particular lawsuit.}

2. United States of America v. First Merchant Bank, No. 1:19-cv-02365-JPHMPB, 2019 WL 3779768, (S.D. Ind., August 12, 2019) 

U.S. alleged bank engaged in unlawful redlining by avoiding providing mortgage credit services to majority-Black areas.

The Fair Housing Act (“FHA”) and the Equal Credit Opportunity Act (“ECOA”) are remedial statutes that promote fair housing and equal credit opportunity by eliminating discrimination. The United States filed a civil complaint against First Merchants Bank (“the Bank”) alleging violations of the FHA and the ECOA committed between 2011-2017. The complaint alleged that the Bank engaged in unlawful redlining by not providing mortgage credit services to majority-black areas in Marion County Indiana. Additionally, the complaint alleged that the Bank excluded Indianapolis-Marion County and its 50 majority-black census tracts from the Bank's Community Reinvestment Act assessment areas, while including overwhelmingly white counties. The complaint further alleged that the Bank failed to have any branch locations in majority-black areas, refused to market in majority-black counties, and had disproportionately low number of loan applications and loan originations from majority-black neighborhoods. In addition, the Bank’s residential mortgage lending policy gave a lending preference based on the location of borrowers, not their creditworthiness. The parties filed a Settlement Agreement with the court. In the agreement, the Bank denied the allegations in the complaint, but agreed to take all actions necessary to ensure that it offers and provides all persons with an equal opportunity to apply for and obtain credit, retain an independent third-party consultant to assess its fair lending risk management program, maintain a fair lending monitoring program, and provide various training to all employees. In addition, the Bank agreed to:

• conduct a community credit needs assessment;
• designate a full-time Director of Community Lending and Development;
• serve a lending area that includes all counties that comprise its current Community Reinvestment Act assessment area, including all of Indianapolis-Marion County;
• open one new full-service branch located in a majority-Black census tract in Indianapolis-Marion County;
• open one loan production office in Indianapolis-Marion County that is centrally located to multiple majority black census tracts and accessible to residents of those tracts through public transportation;
• spend a total of $500,000 on advertising, outreach, consumer financial education, and credit repair; and
• advertise and conduct outreach within majority-Black consensus tracts.

The bank also promised to create a loan subsidy fund of $1.12 million aimed at majority-Black census tracts in Indianapolis-Marion County. Regular reporting requirement provisions were also included in the agreement. The court granted the joint motion for Entry of Settlement Agreement after determining that the agreement was fair, reasonable, and adequate.

3. Prince George's County, Maryland, et. al., v. Wells Fargo & Co., No. PJM 18-3576, 2019 WL 5391302 (D. Md., October 22, 2019)

Suit filed against Wells Fargo sufficiently pled claims associated with foreclosure processing costs.

Prince George's County and Montgomery County (“the Counties”) filed suit against Wells Fargo and related entities (“Defendants”) for alleged predatory and discriminatory residential mortgage lending, servicing, and foreclosure practices in violation of the Fair Housing Act (FHA). In the complaint, the Counties alleged five broad categories of injuries: foreclosure processing costs; the increased cost of municipal services; economic injuries to the Counties’ tax bases; lost municipal income; and non-economic injuries. The Court held that the Counties sufficiently pled claims associated with foreclosure processing costs, but found the alleged non-economic injuries were too far removed from the alleged discriminatory conduct to be “plausibly proximately” caused by the defendants. As for the remaining three categories of alleged injuries – increased municipal services costs, tax base injuries, and lost municipal income and utility fees – the Court deferred making a ruling to allow the Counties an opportunity to amend their complaint by November 15, 2019, to include more detail with respect to these claims.

Statutes and Regulations

No statutory or regulatory changes relating to Fair Housing were located.