News just out from Supreme Court - 5/4 decision upholding disparate impact as part of Fair Housing Act.

http://www.nationalmortgagenews.com/news...-1054481-1.html

Thank you for sharing.

I know I'm just a simple banker and understand what they are trying to accomplish with these "laws" but they are at best paradoxical. You're objective rules are causing a prohibited group to be treated differently so you now must change your rules to be subjective so that the prohibited group is treated differently.

Not sure that I understand your statement? No one is required to change their underwriting rules to be subjective.

I wasn't specifically talking about underwriting just trying to point out the very nature of disparate impact requires you to treat people differently based on a prohibited basis.

Actually it just requires that you consider impact before setting policies, etc.

????? There is absolutely no requirement to treat people differently based on a prohibited basis. That would be classified as "disparate treatment" and not "disparate impact" and there never has been any question that disparate treatment is illegal.

What it finally settles is that even if you treat people the same, if that treatment has a discriminatory affect on a prohibited basis, you need to be able to mount a "business necessity" defense to avoid disparate-impact liability.

I'm sorry, but many people have a hard time understanding these concepts and I fail to see factual content in your comments.

Well ... you're just better than the rest of us.

No - I am not better than anyone else. There are too many misconceptions as it is about fair lending and the application of the surrounding law, as witnessed by the fact that this case had to make it all the way to SCOTUS to be settled.

I am just trying to keep things in perspective and when individuals make statements that are not factual, all the contributors (and not just me) to BOL do their best to help educate others, instead of letting the misconceptions continue to perpetuate.

And that was a very radical misconception that could lead to actual illegal activity by a bank. It needs to be corrrected asap.

Where I think community bankers run into frustrations with disparate impact is: 1) sometimes it is not so easy to determine when drafting a policy or procedure that makes perfect sense from a credit risk, safety and soundness, or income perspective that it will create disparate impact. We are not Kreskins, and with limited resources getting stretched thinner, small banks usually cannot take the time to go through every iteration and try to determine what might happen; and 2)sometimes based upon the market in which you lend, you have to arrive at the conclusion that you have to abandon mortgage lending because it could not happen in a safe or profitable way without creating disparate impact. That runs contrary to many community bankers understanding of community banking. And while we can talk about "business necessity", I'm not sure that many community bank CO's or CLO's are willing to fight that battle in the current regulatory and exam environment.

you have to abandon mortgage lending because it could not happen in a safe or profitable way without creating disparate impact.

Why would anyone have to do that? You price your products and everyone gets that price. You underwrite everyone consistently. You occasionally review the results through a fair lending review. I guess I don't quite follow your argument.

The community banks that do get themselves in trouble are the ones that think they have to develop some unique product for their specific clientele rather than offering just straight up mortgage products with standard pricing and underwriting. They need to run a special program for doctors, or even more bizarre, they try to develop a product to specifically target foreign nationals that may or may not in the country legally (yes, I have seen it) They also cut deals with the good ole boys and do other stupid stuff like that which blows any standard of pricing or underwriting out the window because: "They have known this customer for years".

I'm sorry you feel that way, because it is far from the truth and just one more of those misconceptions. If that was the case, there wouldn't be a community bank around that was making mortgage loans and not being cited on a regular basis for disparate impact and we both know that is not the truth. The fact of the matter is that the majority of small community banks that get cited for fair lending violations are actually cited for disparate treatment because of the factors I previously mentioned - lack of standardized pricing and underwriting.