HUD has now formally proposed controversial changes to its rules addressing discrimination in relation not only to how state and local governments set housing policy, but also how private institutions may be judged in terms of compliance with this Act’s rules against discrimination in terms of providing and/or pricing mortgage credit for “protected” classes of borrowers (i.e., women, persons of color, the disabled, older Americans, and other groups).  HUD’s standards would make it far more difficult for borrowers to assert successful disparate-impact claims, allowing lenders, servicers, and underwriters more freely to set terms and conditions that, when these are not also well correlated with risk, adversely affect minority, women, or other protected-class borrowers.  Mortgage-market participants unwilling or unable due to other rules to match these lenders could experience greater demand from borrowers priced out of HUD-regulated markets, reducing cross-subsidization risk management in ways that pose greater credit risk and profitability challenges.

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