The Supreme Court issued their decision that upholds Disparate Impact. Although it was decided narrowly, it doesn’t matter because it was upheld. This is not the best news for lenders of any sort, because it will require us to really look hard at our lending patterns and practices. For mortgage bankers in particular, we are going to need to really shake up the way we do business to meet the new demands. We have never been concerned about where we lend. We just decided to lend where we want to lend. Not anymore!
Although the court imposed some limitations on the legal theory, the bottom line is that it left a whole lot of wiggle room for the regulators. Enough wiggle room that we will need to take this new reality seriously, and implement strong controls and monitoring around it.
They directed lower courts to “examine with care”, “concentrate on the elimination of the practice in remedial orders”, and basically demonstrate that you are “race neutral”. See what I mean about the wiggle room?
So what does this mean for mortgage lenders? We are going to have to:
1. Look hard at our lending diversity and monitor that.
2. Beef up our fair lending practices and training.
3. Explore action plans to implement which will result in more diverse lending
4. Review product offerings to make sure they are compatible in cost, to under-served markets.
5. Consider adding “diversity originators” that concentrate on under-served markets like banks who have “CRA Officers”.
6. Re-think how we market for business.
Now that we know this legal theory is being upheld by the highest court, it’s time to roll up our sleeves and think about the future, as the past is now gone. To do that, I will be posting quite a bit on Fair Lending techniques that will assist you in moving forward.
