HUD: Reg B-Compliant Loan Programs Targeting Underserved Groups Don’t Violate Fair Housing Act

The Department of Housing and Urban Development today issued guidance that for-profit companies’ special-purpose credit programs designed and implemented with the Equal Credit Opportunity Act do not generally violate the Fair Housing Act. HUD said that ECOA and the Fair Housing Act “are complementary and should generally be harmonized.”

SPCPs are programs designed to “direct financial assistance to groups who have historically locked out of homeownership,” according to a memo from HUD’s Office of Fair Housing and Equal Opportunity that accompanied the guidance. In late 2020, the CFPB—which implements ECOA through Regulation B—said it is not considered discrimination for for-profit organizations to provide SPCPs designed to meet special social needs, adding that the bureau “does not determine whether individual programs qualify for special purpose credit status.” CFPB Director Rohit Chopra welcomed today’s guidance from HUD.

However, HUD—which has enforcement authority to prevent discrimination under the Fair Housing Act—said that “[w]hen asked why they have not previously established Special Purpose Credit Programs, some lenders told HUD and other federal agencies that they are willing to establish such Programs to improve homeownership opportunities for racial and ethnic groups who have been underserved historically, but that they are worried that those Programs may run afoul of the Fair Housing Act and other federal anti-discrimination laws.”