The Supreme Court of the United States (SCOTUS) is reviewing briefs filed in a case involving a citizens' group in New Jersey that may end up with a significant impact to the mortgage lending industry. The case in question is Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc., and it could end up changing the way racial discrimination claims are handled under the Fair Housing Act.
Alleged racial discrimination lawsuits against major lenders such as Bank of America and Wells Fargo were settled for almost $500 million in 2011. U.S. Attorneys under the Obama administration have been successful in applying the Fair Housing Act to bring civil actions against mortgage lenders that engage in redlining and other unethical practices –even when the lenders take a defensive position that proves that their disparate actions were unintentional.
Mount Holly Gardens
The appeal before the Supreme Court involves what is left of the nearly-demolished Mount Holly Gardens neighborhood in New Jersey. Mount Holly Gardens originally served the noble purpose of housing veterans returning from World War II, but in the mid-1980s the neighborhood descended into extreme blight. By 2002 the Mount Holly Township council called for redevelopment of the Gardens neighborhood and offered the mostly African American and Latino homeowners a series of cash and loan incentives to give up their homes.
It took more than a decade for the Township to take possession of most homes and demolish them. The neighbors who refused to sell their homes alleged they were victims of hostile gentrification. They revived an old neighborhood association and took the Township to court in an effort to keep their homes. They relied on protections afforded by the Fair Housing Act against actions that can bring about a disparate impact on minorities.
The Township Appeals
Only 20 percent of the Mount Holly Gardens properties remains, and their owners wish to keep them. The Township wants to move forward with redevelopment since it has already cost $18 million. Special interest groups like the American Financial Services Association are filing amicus curiae briefs on behalf of the Township to limit the effect of the Fair Housing Act in these cases.
Lenders will be watching this case closely. Under current provisions of the law, lenders do not have to show malicious intent to be fined for discriminatory practices. The Obama administration has been successful in proving disparate impact against minorities caused by lending practices, and this has proven costly for mortgage lenders who now would like to see protective clauses redefined in the Fair Housing Act.
