September 27, 2021

Volume XI, Number 270

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September 24, 2021

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FHFA Issues Policy Statement on Fair Lending Requirements under the ECOA, Fair Housing Act, and Safety and Soundness Act

On Thursday, the Federal Housing Finance Agency (FHFA) issued a policy statement covering its views on fair lending requirements (Fair Lending Policy Statement) under the Equal Credit Opportunity Act, the Fair Housing Act, and the Federal Housing Enterprises Financial Safety and Soundness Act. The Fair Lending Policy Statement is the latest in a list of recently released pronouncements from the Biden administration and the CFPB on the critical topic of racial equity.

As stated by FHFA’s Acting Director Sandra L. Thompson, “FHFA is committed to fair mortgage lending because it ensures that all Americans have equal access to safe, decent, and affordable Housing. FHFA’s Policy Statement on Fair Lending clearly communicates the Agency’s fair lending expectations for the regulated entities and outlines the Agency’s fair lending oversight and enforcement to ensure compliance with the law.” Further, “FHFA will never tolerate illegal discrimination by the regulated entities.”

FHFA Issues Policy Statement on Fair Lending Requirements under the ECOA, Fair Housing Act, and Safety and Soundness Act

The Fair Lending Policy Statement is applicable to FHFA’s regulated entities, Fannie Mae and Freddie Mac (the GSEs) and the Federal Home Loan Banks (FHLBs) (collectively, the regulated entities). FHFA intends for its statement to provide a foundation for future fair lending rulemaking and also describes FHFA’s commitment to cooperating with other federal agencies that enforce fair lending laws, including the U.S. Department of Housing and Urban Development and the Consumer Financial Protection Bureau.

The Fair Lending Policy Statement describes a number of tools FHFA uses to ensure the regulated entities comply with fair lending laws. These tools include reviewing the regulated entities’ internal fair lending monitoring, risk assessments, policies and procedures, and internal control systems and the use of supervisory examinations and enforcement activities by FHFA. To encourage the regulated entities to act in a manner consistent with fair lending practices, FHFA indicates that it will view favorably when making supervisory or enforcement determinations any regulated entity’s responsible business practices, such as self-testing, implementation of management controls, and voluntary remedial action. Additionally, even though the regulated entities are not required to self-report violations of fair lending laws to FHFA, the agency views favorably any regulated entity’s self-report of potential violations of fair lending laws and cooperation and candor during examinations.

Of course, FHFA’s supervisory authority under the Fair Lending Policy Statement is generally limited to the regulated entities; however, mortgagees should be prepared for any possible additional or enhanced requirements that the GSEs or the FHLBs may subsequently impose related to fair lending or a servicer’s monitoring of its fair lending (and fair servicing) practices. We expect additional announcements on racial equity, fair lending, and fair servicing from nearly all regulatory bodies that regulate the housing and credit industries.

The Takeaway

Mortgage originators and servicers should thoroughly review their existing fair lending policies and procedures to ensure they are acting appropriately, especially given the current administration’s emphasis on fair housing and lending. FHFA is soliciting public comments on its Fair Lending Policy Statement. Public comments are due 60 days after the statement’s publication in the Federal Register, which is still unpublished as of the drafting of this post.

© 2021 Bradley Arant Boult Cummings LLPNational Law Review, Volume XI, Number 183
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About this Author

Austin Holland Attorney Regulatory Compliance Bradley Nashville
Associate

Austin Holland’s practice focuses on regulatory compliance matters, government enforcement actions, and financial services litigation. He has represented clients in a variety of matters, but his practice is particularly focused on issues with an emphasis on matters related to housing.

Prior to joining Bradley, Austin worked for the U.S. Department of Housing and Urban Development in the Office of Litigation, where he handled matters related to affordable housing, reverse mortgages, fair housing, bankruptcy, foreclosures, grant recaptures,...

615-252-2329
Christopher Friedman Nashville Lawyer Bradley Arant Boult Cummings Law Firm
Associate

Chris Friedman is a regulatory compliance attorney and litigator who focuses on helping consumer finance companies and small business lenders, as well as banks, fintech companies, and other participants in the financial services industry, address the challenges of operating in a highly regulated sector. Chris focuses on both small business lenders and alternative business finance products and has helped non-bank small business lenders, banks who make small business loans, commercial credit counselors, lead generators, and others in the industry. He helps clients launch new products,...

615-252-3504
Christy Hancock Financial Services Lawyer Bradley
Partner

Christy Hancock’s practice is dedicated to financial services regulatory compliance and litigation. Her work with mortgage servicing and financial institution clients has given her a broad base of knowledge regarding laws affecting the mortgage servicing business, including bankruptcy and foreclosure best practices, payment application, correspondence requirements, allowable fees, loan modifications, escrow requirements, and property preservation. In recent years, the majority of her practice has focused on advising large financial institutions on bankruptcy-related...

704.338.6005
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