April 8, 2022

Housing Discrimination

Fair Housing Act and Financial Institutions

Recently, the Department of Justice announced an initiative to work with the Consumer Financial Protection Bureau and the Comptroller of the Currency, pledging to address the longstanding impact of redlining1 —systemic discrimination based on race that pushes people of color into redlined areas where banks refuse to provide financing.2

Federal and state laws prohibit discrimination in real estate lending because of membership in a protected class. Despite this prohibition, black borrowers in Minnesota are denied financing three times more than white applicants with similar qualifications.3

Under Minnesota law, lenders cannot discriminate against an individual because of their race, color, creed, religion, national origin, sex, marital status, status with regard to public assistance, disability, sexual orientation, or familial status.4 Lenders also cannot ask about an individual’s membership in a protected class in connection with the loan application, or discriminate against a person because of “the social, economic, or environmental conditions of the area” in which the person desires to live.5

Under the Fair Housing Act, both intentional discrimination and practices that disproportionately affect members of a particular protected class without other justification are unlawful.6 Discrimination may be obvious, proven by the use of slurs or derogatory comments about a protected status. More often, however, discrimination is subtle.

Even without direct evidence of discriminatory intent, an individual can prove intentional discrimination by showing:

  1. They were a member of a protected class;
  2. They applied and were qualified for a loan from the financial institution;
  3. The loan was rejected despite the individual’s qualifications; and
  4. That the financial institution continued to approve loans for applicants with qualifications similar to those of the individual7

If the financial institution can present some legitimate, non-discriminatory reason for denying the loan, the individual has the opportunity to present that a discriminatory motive was more likely than not the reason for the denial or that the lender’s reason for the denial is unworthy of credence.

Neutral policies or practices may have discriminatory effects that are actionable under the Fair Housing Act. To bring a successful “disparate impact” claim, an individual must point to a particular policy that is having or predictably will have a disparate impact on members of a protected class.  If the institution can prove the practice is necessary to achieve a legitimate interest, the individual can still prevail by showing a less discriminatory practice could serve the institution’s goal.8

If you feel you have been discriminated against in your application for housing-related financing, please contact our office for a free initial consultation.

1. [John M. Gore & Alexander V. Maugeri, Banks Need to Gird for Tough Fair Lending and Housing Enforcement, Bloomberg Law (Nov. 12, 2021), https://news.bloomberglaw.com/business-and-practice/banks-need-to-gird-for-tough-fair-lending-and-housing-enforcement.]

2. [See What are Covenants?, Univ. of Minn. Libraries: Mapping Prejudice, https://mappingprejudice.umn.edu/what-are-covenants/index.html.]

3. [Lauren Leamanczyk, Brandon Stahl & Steve Eckert, Mortgage Denial Rates 3 Times Higher for Black Borrowers in MN, KARE11 (Oct. 21, 2021), https://www.kare11.com/article/news/investigations/kare-11-investigates-mortgage-denial-rates-three-times-higher-for-black-borrowers-in-mn/89-9b003f2e-6807-4d3e-b156-85b9fecd7647.]

4. [Minn. Stat. § 363A.09, subdiv. 3(1).]

5. [Minn. Stat. § 363A.09, subdiv. 3(2)-(3).]

6. [See Texas Dept. of Housing & Community Affairs v. Inclusive Communities Project, Inc., 576 U.S. 519, 545 (2015).]

7. [Ring v. First Interstate Mortg., Inc., 984 F.2d 924, 926 (8th Cir. 1993).]

8. [24 C.F.R. § 100.500(c).]