HUD Issues Rule to Standardize Discriminatory Housing Cases

""HUD"":http://portal.hud.gov/hudportal/HUD announced Friday the issuing of a ""final rule"":http://portal.hud.gov/hudportal/documents/huddoc?id=discriminatoryeffectrule.pdf to formalize a national standard for determining whether a practice violates the Fair Housing law based on an ""unjustified"" discriminatory effect.

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According to the agency, the rule establishes a three-part test that shifts burden of proof in a discriminatory housing case back and forth between the plaintiff and defendant. It is designed to address recent debates over whether or not a housing practice can be considered discriminatory if it seems neutral on the surface.

""As we've learned over the years, housing discrimination comes in many forms. Discrimination doesn't have to be intentional in order to have a damaging effect,"" said HUD Secretary Shaun Donovan. ""HUD, which has the responsibility and authority to interpret and enforce the Fair Housing Act, has long interpreted the Act to prohibit housing practices with an unjustified discriminatory effect, if those acts actually or predictably result in a [COLUMN_BREAK]

disparate impact on a group of persons, or create, increase, reinforce or perpetuate segregated housing patterns.""

The established test goes through three steps: First, the plaintiff has the burden of proving its case that a practice ""results in, or would predictably result in,"" a discriminatory effect based on a protected characteristic--for example, race, sex, or religion.

If the case is proven, the burden shifts to the defendant to prove that the practice is necessary to achieve another legitimate, substantial, non-discriminatory interest. If that burden is satisfied, the plaintiff can then try to prove that the defendant's interest can be achieved through another practice that has a less discriminatory effect.

The final rule addresses a number of issues brought up from lenders about the potential chilling effect it may have on business.

""HUD does nto believe that the rule will have a chilling effect on lending in lower income communities or that it will encourage lawsuits challenging credit scores, other credit assessment standards, or the requirements of the Dodd-Frank Act ... [T]he rule does not change the substantive law; eleven federal courts of appeals have recognized discriminatory effects liability under the Act and over the years courts have evaluated both meritorious and non-meritorious discriminatory effects claims challenging lending practices,"" the rule says.

Rather, HUD asserts ""the rule will simply compliance with the Fair Housing Act's discriminatory effects standard and decrease litigation associated with such claims by clearly allocating the burdens of proof and how such burdens are to be met.""