Rule2021-14438
Policy Statement on Fair Lending
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 9, 2021
Effective
July 9, 2021
Issuing agencies
Federal Housing Finance Agency
Abstract
The Federal Housing Finance Agency (FHFA or agency) is issuing a policy statement on Fair Lending (Policy Statement) to communicate the agency's general position on monitoring and information gathering, supervisory examinations, and administrative enforcement related to the Equal Credit Opportunity Act, the Fair Housing Act, and the Federal Housing Enterprises Financial Safety and Soundness Act, and is soliciting comments on its application.
Full Text
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<title>Federal Register, Volume 86 Issue 129 (Friday, July 9, 2021)</title>
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[Federal Register Volume 86, Number 129 (Friday, July 9, 2021)]
[Rules and Regulations]
[Pages 36199-36202]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-14438]
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FEDERAL HOUSING FINANCE AGENCY
12 CFR Part Chapter XII
[No. 2021-N-7]
Policy Statement on Fair Lending
AGENCY: Federal Housing Finance Agency.
ACTION: Notification of approval and adoption of policy statement;
request for comment.
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SUMMARY: The Federal Housing Finance Agency (FHFA or agency) is issuing
a policy statement on Fair Lending (Policy Statement) to communicate
the agency's general position on monitoring and information gathering,
supervisory examinations, and administrative enforcement related to the
Equal Credit Opportunity Act, the Fair Housing Act, and the Federal
Housing Enterprises Financial Safety and Soundness Act, and is
soliciting comments on its application.
DATES: The Policy Statement becomes effective on July 9, 2021. Comments
must be received on or before September 7, 2021.
FOR FURTHER INFORMATION CONTACT: Annalyce Shufelt, Senior Attorney
Advisor (Fair Lending), Office of Fair Lending Oversight, (202) 649-
3416, <a href="/cdn-cgi/l/email-protection#44052a2a25283d27216a172c312221283004222c22256a232b32"><span class="__cf_email__" data-cfemail="15547b7b74796c76703b467d607370796155737d73743b727a63">[email protected]</span></a>, Federal Housing Finance Agency,
Constitution Center, 400 7th Street SW, Washington, DC 20219; or Ming-
Yuen Meyer-Fong, Associate General Counsel, Office of General Counsel,
(202) 649-3078 (not toll-free numbers), <a href="/cdn-cgi/l/email-protection#d79abeb9b0fa8ea2b2b9f99ab2aeb2a5fa91b8b9b097b1bfb1b6f9b0b8a1"><span class="__cf_email__" data-cfemail="763b1f18115b2f031318583b130f13045b3019181136101e101758111900">[email protected]</span></a>.
The Telecommunications Device for the Deaf is (800) 877-8339.
ADDRESSES: FHFA welcomes comments about application of the principles
set out in the policy statement to specific policies and practices. You
may submit your comments to FHFA, identified by ``Policy Statement;
Comment Request: (2021-N-7)'', by any one of the following methods:
<bullet> Agency website: <a href="http://www.fhfa.gov/open-for-comment-or-input">www.fhfa.gov/open-for-comment-or-input</a>.
<bullet> Federal eRulemaking Portal: <a href="http://www.regulations.gov">http://www.regulations.gov</a>.
Follow the instructions for submitting comments. If
[[Page 36200]]
you submit your comment to the Federal eRulemaking Portal, please also
send it by email to FHFA at <a href="/cdn-cgi/l/email-protection#e3b18684a08c8e8e868d9790a3858b8582cd848c95"><span class="__cf_email__" data-cfemail="74261113371b1919111a000734121c12155a131b02">[email protected]</span></a> to ensure timely
receipt by FHFA. Include the following information in the subject line
of your submission: ``Policy Statement; Comment Request: (2021-N-7).''
<bullet> Hand Delivered/Courier: The hand delivery address is:
Clinton Jones, General Counsel, Attention: ``Policy Statement; Comment
Request: (2021-N-7)'', Federal Housing Finance Agency, Eighth Floor,
400 Seventh Street SW, Washington, DC 20219. Deliver the package at the
Seventh Street entrance Guard Desk, First Floor, on business days
between 9 a.m. and 5 p.m.
<bullet> U.S. Mail, United Parcel Service, Federal Express, or
Other Mail Service: The mailing address for comments is: Clinton Jones,
General Counsel, Attention: ``Policy Statement; Comment Request: (2021-
N-7)'', Federal Housing Finance Agency, Eighth Floor, 400 Seventh
Street SW, Washington, DC 20219. Please note that all mail sent to FHFA
via U.S. Mail is routed through a national irradiation facility, a
process that may delay delivery by approximately two weeks. For any
time-sensitive correspondence, please plan accordingly.
We will post all public comments we receive without change,
including any personal information you provide, such as your name and
address, email address, and telephone number, on the FHFA website at
<a href="http://www.fhfa.gov">http://www.fhfa.gov</a>. In addition, copies of all comments received will
be available for examination by the public through the electronic
comment docket also located on the FHFA website.
SUPPLEMENTARY INFORMATION:
I. Purpose
FHFA is the primary regulator for Fannie Mae and Freddie Mac (the
Enterprises) and the Federal Home Loan Banks (the Banks) (collectively,
the regulated entities). FHFA is issuing this Policy Statement to
communicate FHFA's general position on monitoring and information
gathering, supervisory examinations, and administrative enforcement
related to the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691 et
seq., the Fair Housing Act, 42 U.S.C. 3601 et seq., and section 4545 of
the Federal Housing Enterprises Financial Safety and Soundness Act
(Safety and Soundness Act), 12 U.S.C. 4501 et seq. (collectively, with
implementing regulations and other sources, ``fair lending laws'').
This Policy Statement is intended to be consistent with those statutes
and their implementing regulations and to provide guidance to FHFA's
regulated entities seeking to comply with them. It describes sources of
statutory authority for actions that may be taken by FHFA and it
articulates FHFA's policies for supervisory oversight and enforcement
of fair lending matters. FHFA is also issuing this Policy Statement to
provide a foundation for possible future interpretations and
rulemakings by the agency for its regulated entities.\1\
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\1\ As a historical note, in 1994, a number of Federal agencies
published a Policy Statement on Discrimination in Lending (1994
Statement) which, in part, described how Federal agencies use their
authorities to oversee fair lending compliance. See 59 FR 18266
(April 15, 1994). FHFA did not exist at the time and was not a
signatory. In 2008, Congress abolished the former Office of Federal
Housing Enterprise Oversight and the Federal Housing Finance Board,
which had been parties to the 1994 Statement. In their place,
Congress established FHFA with authorities that, in contrast to its
predecessor agencies, include overseeing Enterprise and Bank
compliance with applicable law. 12 U.S.C. 4511(b) (FHFA ``shall have
general regulatory authority over each regulated entity . . . and
shall exercise such general regulatory authority . . . to ensure
that the purposes of this Act, the authorizing statutes, and any
other applicable law are carried out''). Given the importance of
fair lending compliance, FHFA is publishing this FHFA Policy
Statement on Fair Lending to implement its authorities and
articulate agency activities in relevant areas including monitoring,
examination, enforcement, and coordination to oversee regulated
entity fair lending compliance.
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II. Policy Statement
Fair Lending Policy Statement
FHFA is committed to ensuring that its regulated entities operate
consistently with the public interest and with sufficient overall risk
management by providing fair, equitable, and nondiscriminatory access
to credit and housing. Fair lending is central to the principles under
which the U.S. housing finance system operates and is a requirement of
law. FHFA will never tolerate illegal discrimination by the regulated
entities. FHFA will engage in comprehensive fair lending oversight of
its regulated entities and adopts the following high-level policies to
guide its fair lending monitoring, supervision, and enforcement. FHFA
is committed to interagency engagement, coordination, and collaboration
in fair lending.
Legal Overview
While many Federal statutes seek to promote fair lending, FHFA's
policy statement focuses on ECOA, the Fair Housing Act, and the fair
lending provisions of the Safety and Soundness Act as they apply to the
regulated entities' activities. This policy statement does not create
or confer any substantive or procedural rights which could be
enforceable in any administrative or civil proceeding.
The Consumer Financial Protection Bureau's (CFPB) Regulation B, 12
CFR part 1002, along with Official Interpretations in Supplement I to
12 CFR part 1002, implements ECOA.\2\ The U.S. Department of Housing
and Urban Development's (HUD) regulations at 24 CFR part 100 implement
the Fair Housing Act. Together, these statutes and regulations prohibit
discrimination on the basis of race or color, religion, national
origin, sex, marital status, age (provided the applicant has the
capacity to contract), receipt of income derived from any public
assistance program, exercise, in good faith, of any right under the
Consumer Credit Protection Act, familial status (defined by 42 U.S.C.
3602(k) of the Fair Housing Act as children under the age of 18 living
with a parent or legal custodian, pregnant women, and people securing
custody of children under 18), and disability.\3\
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\2\ The Federal Reserve Board of Governors also implements ECOA
through a regulation covering auto dealers.
\3\ The Fair Housing Act uses the term ``handicap'' instead of
``disability.'' This document uses the term ``disability,'' which is
more generally accepted. See Joint Statement of the Department of
Housing and Urban Development and the Department of Justice on
Accessibility (Design and Construction) Requirements for Covered
Multifamily Dwellings under the Fair Housing Act, April 30, 2013,
available at <a href="https://www.hud.gov/sites/documents/JOINTSTATEMENT.PDF">https://www.hud.gov/sites/documents/JOINTSTATEMENT.PDF</a>
(citing Bragdon v. Abbott, 524 U.S. 624, 631 (1998), to say that
both terms have the same legal meaning).
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The Enterprises are also subject to section 4545 of the Safety and
Soundness Act, which requires HUD, by regulation, to prohibit the
Enterprises from discriminating in the purchase of mortgages on the
bases of race, color, religion, sex, disability, familial status, age,
or national origin, including any consideration of the age or location
of the dwelling or the age of the neighborhood or census tract where
the dwelling is located in a manner that has a discriminatory
effect.\4\
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\4\ 12 U.S.C. 4545.
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FHFA also recognizes that there are a number of applicable and
relevant sources of fair lending law and guidance, including judicial
decisions, administrative interpretations and guidance, and
administrative actions.
Fair Lending Oversight Considerations
FHFA has broad statutory authority to supervise the regulated
entities, including authority to monitor and gather information,
conduct supervisory examinations, and enforce compliance with law where
appropriate. FHFA monitors regulated entities for fair lending risk,
conducts supervisory examinations, and, when necessary,
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takes enforcement action to ensure compliance with fair lending laws.
Monitoring and Information Gathering
FHFA regularly monitors the fair lending risk presented by
Enterprise and Bank activities and may request data and information in
its role as supervisor and regulator to ensure effective, ongoing
oversight. FHFA reviews the regulated entities' internal fair lending
data monitoring, risk assessments, policies and procedures, internal
control systems, and other information to appropriately scope
monitoring and examinations commensurate with fair lending risk. Fair
lending monitoring information may be collected pursuant to FHFA's
supervisory and regulatory authority, including 12 U.S.C. 4514(a) which
authorizes FHFA to order regulated entities to submit both regular and
special reports. FHFA may require regulated entities to submit
``regular reports . . . on the condition (including financial
condition), management, activities, or operations of the regulated
entity, as the Director considers appropriate.'' \5\ Fair lending
monitoring information includes, but is not limited to: Data and other
information necessary to monitor and evaluate the policies, programs,
and activities of the regulated entities; information about changes in
policies, programs, and activities; information about the regulated
entities' fair lending testing and other compliance activities; and the
regulated entities' self-evaluations of fair lending risk and the
compliance of their policies, programs, and activities with respect to
fair lending laws.
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\5\ 12 U.S.C. 4514(a).
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Supervisory Examinations
FHFA has broad authority to supervise the Enterprises and the Banks
for compliance with fair lending standards. The regulated entities are
subject to FHFA's overarching ``supervision and regulation.'' \6\ FHFA
may conduct examinations of the regulated entities whenever FHFA
determines that an examination is necessary or appropriate.\7\ FHFA
examiners have examination authority equivalent to other Federal
prudential regulators.\8\ FHFA also has a duty to ensure that the
regulated entities are operating consistently with the public
interest.\9\
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\6\ 12 U.S.C. 4511(b)(1) (``Each regulated entity shall, to the
extent provided in this chapter, be subject to the supervision and
regulation of the Agency''); 12 U.S.C. 4511(b)(2) (``The Director
shall have general regulatory authority over each regulated entity
and the Office of Finance, and shall exercise such general
regulatory authority, including such duties and authorities set
forth under section 4513 of this title, to ensure that the purposes
of this Act, the authorizing statutes, and any other applicable law
are carried out.'').
\7\ 12 U.S.C. 4517(b).
\8\ 12 U.S.C. 4517(e). The statute particularly references the
authority of examiners employed by the Federal Reserve banks.
\9\ 12 U.S.C. 4513(a)(1)(B)(v).
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FHFA conducts risk-based fair lending examinations of the regulated
entities. FHFA's fair lending oversight program is committed to
effective, appropriately tailored supervisory measures to ensure that
the regulated entities adhere to applicable fair lending compliance
standards. The Enterprises and the Banks each engage in activities that
present differing levels and kinds of fair lending risk. FHFA carefully
weighs the totality of available information, including monitoring
information, market intelligence, and relevant data, when considering
how best to employ supervisory resources.
Enforcement
FHFA may use its administrative enforcement authority to address
violations of ECOA and the Fair Housing Act by the regulated entities.
That a regulated entity is in conservatorship does not preclude other
enforcement actions; however, the conservator's broad statutory powers
may provide FHFA with more efficient means to address problems than
traditional enforcement tools. FHFA as conservator may take immediate
action, consistent with applicable law, to direct or restrict the
activities at the regulated entity, including the activities of the
board of directors and executive management.
FHFA has broader enforcement authority than its predecessor
agencies FHFB and OFHEO, including for fair lending violations. The
Housing and Economic Recovery Act (HERA) \10\ granted FHFA the
authority to use cease and desist orders to enforce violations of all
applicable laws, including ECOA and the Fair Housing Act.\11\ FHFA may
also use civil money penalties as a tool to ensure fair lending
compliance, where the statutory bases for such penalties are
present.\12\
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\10\ The Housing and Economic Recovery Act of 2008 (HERA),
Public Law 110-289 (July 30, 2008), available at <a href="https://www.govinfo.gov/content/pkg/PLAW-110publ289/pdf/PLAW-110publ289.pdf">https://www.govinfo.gov/content/pkg/PLAW-110publ289/pdf/PLAW-110publ289.pdf</a>.
\11\ Public Law 110-289, sec. 1101 (amended the former OFHEO
authorities to provide the new FHFA general supervisory and
regulatory authority requiring regulated entity compliance with the
Safety and Soundness Act, the regulated entities statutory charters,
and ``any other applicable law''); sec. 1151 (amended cease and
desist authorities to include violations of law generally); codified
at 12 U.S.C. 4511 and 4631.
\12\ 12 U.S.C. 4636.
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Prior to HERA, OFHEO's fair lending enforcement authority over the
Enterprises was limited to the Safety and Soundness Act fair housing
provision and HUD's implementing regulation.\13\ HUD's implementing
regulation anticipates HUD referring violations and potential
violations of that provision by an Enterprise to FHFA for
enforcement.\14\ FHFA will support enforcement of HUD's regulation
implementing the Safety and Soundness Act's fair housing provision.
FHFA will conduct a full review of HUD's referral of a violation or
potential violation and all evidence submitted as part of the referral
and resolve the matter appropriately and in accordance with FHFA's
enforcement policy and in consultation with HUD. In addition, FHFA will
continue to facilitate HUD's periodic fair lending reviews of the
Enterprises. FHFA may also independently pursue administrative
enforcement actions for any violations of section 4545 of the Safety
and Soundness Act.
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\13\ See 24 CFR 81.47(a).
\14\ 24 CFR 81.47(a). Under the Safety and Soundness Act, FHFA
is empowered to initiate enforcement actions for Enterprise
violations of 12 U.S.C. 4545 and HUD's implementing regulations. The
process for referring ``violations or potential violations'' to FHFA
under 24 CFR 81.47(a) is distinct from the process under 24 CFR
81.47(b), in which HUD shall conduct an investigation of the Fair
Housing Act complaint, make a determination as to whether or not
reasonable cause exists to believe discrimination occurred, and, if
it does, proceed to enforcement under the Fair Housing Act.
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FHFA's enforcement policy applies when taking any enforcement
action against regulated entities for violations of law, including
violations of fair lending law.\15\ Pursuant to FHFA's enforcement
policy, FHFA may engage in consent order negotiations with regulated
entities to resolve violations of fair lending laws.\16\ FHFA is not
required by statute to refer potential fair lending violations to the
Attorney General when the agency has a reason to believe that a
regulated entity has engaged in a pattern or practice of discouraging
or denying applications for
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credit.\17\ Nevertheless, FHFA will consult with and refer matters to
the Attorney General and coordinate with the Department of Justice on
enforcement of fair lending matters as appropriate.
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\15\ Federal Housing Finance Agency, Advisory Bulletin: FHFA
Enforcement Policy, AB 2013-03 (issued May 31, 2013), available at
<a href="https://www.fhfa.gov/SupervisionRegulation/AdvisoryBulletins/AdvisoryBulletinDocuments/20130531_AB_2013-03_FHFA-Enforcement-Policy_508%20">https://www.fhfa.gov/SupervisionRegulation/AdvisoryBulletins/AdvisoryBulletinDocuments/20130531_AB_2013-03_FHFA-Enforcement-Policy_508%20</a>(2).pdf.
\16\ Federal Housing Finance Agency, Advisory Bulletin: FHFA
Enforcement Policy, AB 2013-03 (issued May 31, 2013), available at
<a href="https://www.fhfa.gov/SupervisionRegulation/AdvisoryBulletins/AdvisoryBulletinDocuments/20130531_AB_2013-03_FHFA-Enforcement-Policy_508%20">https://www.fhfa.gov/SupervisionRegulation/AdvisoryBulletins/AdvisoryBulletinDocuments/20130531_AB_2013-03_FHFA-Enforcement-Policy_508%20</a>(2).pdf. The Enforcement Policy further describes a
number of informal and formal actions that FHFA may take, many of
which may be used for enforcing compliance with fair lending laws.
\17\ 15 U.S.C. 1691e(g).
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FHFA will consider whether the regulated entity has conducted any
self-evaluations or undertaken any corrective actions when making
supervisory and enforcement decisions. FHFA will view responsible
business practices such as self-testing, implementation of management
controls, and voluntary remedial action favorably when making fair
lending supervisory and enforcement determinations. In particular, FHFA
commits to taking into consideration an entity's cooperation and candor
during examinations and monitoring. Regulated entities are not required
to self-report potential violations of fair lending laws. However,
self-reporting of violations of fair lending laws will be viewed
favorably by FHFA as it exercises its discretion. FHFA also considers
the number and duration of violations identified, the nature of the
evidence of discrimination (i.e., overt discrimination, disparate
treatment, or disparate impact), the pervasiveness of the
discrimination, the presence and effectiveness of any anti-
discrimination policies, any history of discriminatory conduct, any
corrective measures implemented or proposed by the regulated entity,
and any other factors for determining the appropriateness of any
potential action.
Consideration of Differences Between the Banks and the Enterprises
FHFA recognizes the important distinctions between the two types of
regulated entities, the Enterprises and the Banks. In drafting this
Policy Statement, FHFA has considered the differences between the
Enterprises and the Banks with respect to the Banks' cooperative
ownership structure, mission of providing liquidity to members,
affordable housing and community development mission, capital
structure, and joint and several liability, as well as other applicable
differences.\18\
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\18\ 12 U.S.C. 4513(f).
Sandra L. Thompson,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2021-14438 Filed 7-8-21; 8:45 am]
BILLING CODE 8070-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.