Battle lines drawn over new HUD rule on bias suits.

Byline: William Morris

Some Minnesota groups are gearing up to fight through litigation, if necessary against new federal rules that would raise the bar for plaintiffs bringing lawsuits alleging housing discrimination.

The dispute arises over so-called "disparate impact" housing discrimination policies that do not explicitly prefer one demographic over another but nonetheless have an adverse effect on members of a protected class under the U.S. Fair Housing Act. Such cases have been brought against landlords, mortgage lenders and other groups, including a 2017 case brought against Chaska-based Kleinbank.

A 2013 Department of Housing and Urban Development regulation laid out a multistep process to determine what evidence the plaintiff and defendant need to bring to advance or dismiss the case. HUD's revised rule, which wrapped up a public comment period on Oct. 18, would tweak that process in several ways to require more evidence earlier in the case from those bringing disparate impact suits, and lower thresholds for defendants to get cases dismissed.

Comments filed by Minnesota agencies and institutions show a range of arguments for and against the change on both legal and policy grounds. The proposal would be a welcome change to industry groups such as the Minnesota Bankers Association, General Counsel Tess Rice said, because it will allow financial institutions to avoid extensive litigation costs to dismiss unfounded claims.

"You can just take somebody's [Home Mortgage Disclosure Act data] and say oh, this protected class isn't seeing the same amount of loan approvals or whatever, [even if] you don't have any facts to show that we have a specific policy that causes that issue," Rice said in an interview. "In the past, you could have just shown a tiny statistical difference and gotten through that first stage of pleading. Any business in that situation is going to look to settle because you can't afford to go through a court case."

National industry groups share that stance, with the American Bankers Association and Mortgage Bankers Association among the groups asking HUD to amend the 2013 regulations.

Supporters of the existing rule worry the revised rule would have a number of undesirable outcomes. Denise Gamache, executive director of the Battered Women's Justice Project in Minneapolis submitted a comment arguing that weakening the disparate impact rule will make it harder for advocates to challenge policies that make it hard for...