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.”
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.