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Oct. 2015 - Diversified We Stand, Divided We Fall

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FEATURE 30 | TH E M R EP O RT white Americans, who are able to apply and qualify for conven- tional mortgages, and the second path traveled by minorities, who are not able to qualify for home mortgages. Although housing advocacy groups from around the country recognize the existence of a dual market in the housing industry, these groups debate the many factors that contribute to the rise of this housing phenomenon. One reason hypothesized by Cooper is that minorities have lower credit scores, which make them less favorable candidates as mortgage borrowers. Market contraction and wage suppression in the working classes and in manufac - turing segments resulting from the economic collapse of 2007, and the subsequent global reces- sion in 2009, undermined job stability among minority workers occupying such jobs. Further, the labor market hasn't recovered equitably across racial groups, revealing that while whites saw higher wages and lower unem - ployment since 2009, blacks and Hispanics are caught in lower paying jobs with restricted wage growth due to market uncertain - ties. Another reason could be the stringent underwriting standards that do not account for the less traditional means in which minorities may acquire income. A final factor that arguably is a prime mover of the dual market is investors' aversion to purchase mortgage-backed securities in which a majority of the bonds are mortgages secured by property in under-served communities. Lenders are therefore reluctant to approve minorities who generally live in such communities. Although this disparity does and will, at least for the near future, continue to exist, the government and the U.S. Supreme Court have taken many actions to try to help pave the way for a future without this inequality. Legislative and Judiciary Role T here have been many pieces of legislation passed by Congress to make housing more accessible and equal for American citizens. Some of the most important legislative works enacted to govern fair lending include the HMDA, the Equal Credit Opportunity Act, the Community Reinvestment Act, and the Fair Housing Act (FHA). Additionally, in a landmark case, the U.S. Supreme Court ruled that disparate impact claims are cognizable under the FHA. In February 2013 HUD issued an FHA disparate impact rule to set a standard for determin- ing if a lender's practices were, in fact, discriminatory. The Agency reviews a lender's mortgage loan process to determine if there is a disparate impact upon certain protected classes. A disparate impact occurs when a seemingly neutral action causes discrimina- tion in practice. Recently, the U.S. Supreme court issued a ruling in Tex. Dep't of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, Inc. support- ing disparate impact claims under the Fair Housing Act. The case commenced in 2008, when the Inclusive Communities Project, a non-profit organiza- tion that seeks to promote racial integration in Dallas, sued a Texas state agency charged with disproportionately allocating tax credits to developers who build low-income housing projects in minority populated areas. In its analysis, the Supreme Court considered two of its earlier decisions addressing the viability of disparate-impact claims under Title VII of the Civil Rights Act of 1964 ("Title VII") and the Age Discrimination in Employment Act of 1967 ("ADEA"), both of which the Court concluded au - thorized disparate-impact claims. In issuing the majority opinion, Justice Kennedy said that the court found the "otherwise make unavailable" language in the FHA statute was equivalent in function and purpose to the "otherwise adversely affect" language in Title VII and the ADEA. Although disparate impact claims can be brought under the FHA, the court warned that "a disparate- impact claim that relies on a statistical disparity must fail if the plaintiff cannot point to a defendant's policy or policies causing that disparity." Increasing Lending to Minorities T he Supreme Court's new ruling regarding disparate impact claims has and could continue to cause curtailment of lending to blacks and Hispan- ics. However, the Court's ruling should be viewed as the next step in encouraging lenders toward reaching an underserved market, rather than a floodgate to potential litigation. Instead of being defensive about their lend - "The Supreme Court's new ruling regarding disparate impact claims has and could continue to cause curtailment of lending to blacks and Hispanics. However, the Court's ruling should be viewed as the next step in encouraging lenders toward reaching an underserved market, rather than a floodgate to potential litigation."

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