Chapter 5: Fair Housing Laws

***Readily achievable requirement

is based on the size and resources of the business

The Federal Fair Housing Act is administered by

the Office of Fair Housing and Equal Opportunity (FHEO) under the direction of the secretary of Housing and Urban Development (HUD)

***Rate spread

the difference between the rate given at the time of application to one borrower and another borrower with similar financial qualifications

A financial institution must retain its full (unmodified) HMDA-LAR for at least

three years for examination purposes.

Instead of filing a complaint with HUD, a party may file suit in a state or federal court within

two years of the alleged violation

Salesperson should:

-Know the fair housing laws and their responsibilities for compliance -Act in accordance with the law at all times -Keep clear and accurate records -Attend fair housing training seminars periodically -Know the resources to use if misconduct needs to be reported

***Testing

A simulated housing transaction designed to obtain evidence of differential treatment based on an individual's protected class status Basically, those with similar profiles and housing needs, but different in their protected class status (ex. race or sex) visit a real estate office and ask to see the same available unit to find out if the real estate agent treats them differently because of this protected class status

The Home Mortgage Disclosure Act (HMDA) requires financial institutions to maintain and disclose data about home purchases, home purchase approvals, home improvement, and refinance applications involving one to four unit and multi family dwellings. How often must the HMDA data be disclosed.

Annually

Enforcement

As set forth in Section 305 of HMDA (12 USC 2804) the following supervisory agencies enforce compliance with the act and regulation: -Office of the Comptroller of Currency -Board of Governors of the Federal Reserve System -Federal Deposit Insurance Corporation -National Credit Union Administration -Consumer Financial Protection Bureau -U.S Department of Housing and Urban Development

Carl has a habit of directing minority clients to the south end of town because he feels they would be more comfortable in that neighborhood. This practice is known as what?

Steering

What investigative tool has private fair housing groups, along with government agencies, going undercover to find housing discrimination?

Testing (The tester will pose as a customer to check on fair housing compliance)

How can testing be beneficial?

Testing, coupled with good documentation and record keeping, can demonstrate a real estate agency's innocence when faced with a fair housing complaint

What state entity is responsible for administering the Low Income Housing Tax Credit's Program?

Texas Department of Housing and Community Affairs

Fair housing

The Federal Fair Housing Act prohibits discrimination in the sale or rental of housing on the basis of race, color, religion, national origin, handicap, and familial status

Familia Status: Exemption Example

The Kissing Tree in San Marcos, Texas advertises their community as "A Distinctly Texan 55+ Community" The community clearly markets an older demographic, those 55 or older. However, it meets the condition of the Housing for Older Persons Act. Therefore, the community is not guilty of discriminating based on familial status

***Plessy v Ferguson 1896

The Supreme Court decision allowed the use of separate but equal, racially segregated accommodations and facilities. In other words, as long as separate housing for blacks and whites were judged to be equal, they were legal

Brown v Board of Education 1954

The Supreme Court prohibited racial segregation of public schools. The court said that the "separate but equal" doctrine adopted in Plessy v Ferguson had no place in the field of public education

If a buyer asks for "Jewish" area, what do you do?

Explain to the buyer that you, ethically and legally, cannot recommend housing based on religion

By what other name is Title VIII of the Civil Rights Act of 1968 known?

Fair Housing Act

***Federal Reserve Board designed HMDA to:

-Help public officials distribute public sector investments -***Discover if financial institutions are serving the housing needs of communities -Identify where there are discriminatory lending practices

The Federal Reserve Board designed the HMDA to accomplish what 3 requirements?

-Help with public officials to distribute public sector investments -Discover if financial institutions are serving the housing needs of communities -Identify where the discriminatory lending practices

ADA mandates that persons with disabilities have equal access to:

-Jobs -Public accommodations -Government services -Public transportation -Telecommunications

A building or community may not discriminate against families in which one or more children under 18 live with one of the following persons:

-A parent -A person who has legal custody of the child or children -The designee of the parent or legal custodian, with the parent or custodian's written permission

What Testers look for: The place where the tester was interviewed?

-A room with one or more desks and no separate rooms or partitions -A room with one or more desks separated by partitions -A private office -Other

***you should alert their commercial and investor clients of the law and the need to have their leases professionally evaluated and their offices inspected for compliance. owner of a commercial property might have to make changes to a building to bring it into ADA compliance such as:

-Adding ramps to the front entrance or accessible parking spaces -Widening doorwas or aisles -Installing elevators -Improving restroom facilities by adding wider stalls, higher toilets or grab bars

Title VIII of the Civil Rights Act of 1968

-Also known as the Fair Housing Act of 1968 -Prohibited discrimination of housing based on race, color, religion, or national origin (protected classes)

When an applicant applies for credit, a lender MAY NOT do the following:

-Ask about marital status if the applicant is applying for a separate, unsecured account. However, a lender may ask the applicant to provide this information if he or she lives in a "community property" state -Inquire about the applicant's plants for having or raising children -Ask if the applicant receives alimony or child support, unless the applicant will rely on these payments to get credit. The lender may ask if the applicant has to pay alimony or child support

Answering Questions

-Avoid giving opinions -Focus on factual statements based on various features within the home -Explain to the buyer that you ethically and legally cannot recommend housing based upon the race, religion, color, national origin, sex, handicap, or familial status makeup of the neighborhood

American's with Disabilities Act (ADA)

-Became a law in 1990 -ADA mandates that persons with disabilities have equal access to jobs, public accommodations, government services, public transportation, and telecommunications -Prohibits discrimination in the "full and equal enjoyment of goods and services" provided by public places including hotels, shopping centers, and offices -Also applies to the lease and operation of commercial facilities

Each time a person applies for a home mortgage at an institution covered non HMDA, that institution must make a corresponding entry to the register. That must document the following information:

-Date of application -Loan type (conventional, FHA, VA, or loan guaranteed by the Farmers Home Administration -Type of property involved (single, multi family) -Purpose of the loan (home purchase/improvement) -Owner occupancy of the property (owner occupied or non owner occupied) -Loan amount -Whether or not the application was a request for pre approval -Whether or not the application was a request for pre approval -Type of action taken (approved, denied, withdrawn) -Date of action taken -Location (city, county, state) of the property -Ethnicity (Hispanic or non hispanic) of the borrowers -Race and Sex of the borrower(s) -Gross annual income of borrowers -Type of entity that purchased the loan if it was subsequently solid in the secondary market -If the loan was denied, the reason why it was denied (option for entities not regulated by the Office of the Comptroller of the Currency) -If the loan is or not subject to the Home Ownership and Equity Protection act of 1994 -Lien status of the loan (1st or 2nd lien) -Rate spread

Dealing with Testers: Do's

-Do treat the tester as any other buyer you encounter, even if you know they are testing you. -Do respond only to the questions asked and never volunteer information concerning any fair housing violation

Broker's Responsibility

-Follow suggestion of the National Association of REALTORS (NAR). They should post a sign which states it is against company policy as well as state and federal laws to offer any information on the racial, ethnic, or religious make-up of neighborhood or to restrict the listing, showing, or giving of information on the availability of homes for any of those reasons -Prominently display in all offices the Equal Opportunity Poster that the Department of Housing and Urban Development (HUD) distributes -Maintain the concept of fair housing in advertising

What testers look for:

-Greeted by the secretary or receptionist and referred to a salesperson -Greeted by a secretary or receptionist and referred to someone else -Greeted by a salesperson and interviewed by the same salesperson -Greeted by a salesperson and referred to someone else -Greeted by a person identified as the manger or head of the firm and then referred to someone else -Required to make the first approach then greeted -Ignored, even after making the first approach -Other -

Examples of housing discrimination

-Landlords and sellers requesting only specific types of persons be shown their homes and apartments -Sellers showing concern over what their neighbors would say or do if a minority person or a family were to move in -Buyers and renters making derogatory statements about parts of the community -Buyer's and renters asking discriminatory questions about aspects of the neighborhood -Buyers and renters refusing to view properties in parts of the community where certain people live

What testers look for: How long did they have to wait

-Less than 5min -Five min or more but less than 10min -10min or more but less than 15min -15min or more but less than 20 min -20min or more but less than 30min -Asked to return at more convenient time -Asked to leave without being invited to return -Asked to leave without being invited to return -Left the office after waiting 30 minutes without being interviewed -Other

What Testers Look For: Did anyone do any of the following for the tester?

-Offer something to drink, reading material, etc -Offer literature on homes available or on home buying in general -Ask the tester to be seated -Chat with the tester informally while waiting -Other act of courtesy

What the Testers Look For: Did the Salesperson request (either verbally or in written form) any of the following information about tester's housing needs?

-Price or price range -Size -Location by neighborhood or jurisdiction -Style or type of housing -Special features or amenities of house (garage, basement, yard space) (specify) -Special features or amenities in neighborhood (specify) -Down payment able to make -Type of financing desired -Other (specify)

As you've learned, there are many steps a broker should take to ensure compliance with fair housing laws. List two of these steps.

-Prominently display in all offices the Equal Opportunity Poster that HUD distributes -Provide ongoing training and education to call affiliated licensees. Brokers can do that by holding seminars and workshops, watching videos, and bringing in guest speakers

***A broker should take these steps to ensure compliance with fair housing laws:

-Prominently display in all offices the Equal Opportunity Poster that the Department of Housing and Urban Development (HUD) distributes

Extra responsibilities of Brokers

-Provide ongoing training and education to all afflicted licensees by holding seminars, workshops, watching videos, and bringing in guest speakers. Training is also available through NAR, state, and local boards, and real estate schools -Report blatant misconduct by other licensees. This can be an uncomfortable situation. However, when violations are obvious, you should report the behavior to the proper authority -Put a system in place to monitor activities of licensees with regard of fair housing laws, have licensees to keep records of all prospects, keep records of prospects qualifying information, prospects reactions to the property as they were shown, review records periodically -Include a fair housing policy in their office's policy and procedures manual

The protected classes under the Federal Fair Housing Act are:

-Race -Religion -Color -National Origin -Sex -Handicap -Familial status (families with children under 18, women who are pregnant, or adopted family members)

***The CFPB, Reg B makes it illegal and discriminatory to take any of the following actions based on race, color, religion, national origin, sex, marital status, age, because an applicant receives income from a public assistance program, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act:

-Refusing to allow mortgage or provide loan information -Refusing to purchase a loan -Setting different conditions for a loan purchase -Giving different terms for loans, such as interest rates or fees -Discriminating when doing a property appraisal -Refusing to lend for a certain geographic area (redlining)

List 4 practices that would be considered discrimination in mortgage lending.

-Refusing to give a loan or provide a loan information -Refusing to purchase a loan -Setting different conditions for a loan purchase -Giving different terms for loans, such as interest rates or fees

Familial Status Exemption: This act exempts such housing from the familial status discrimination, if one of the following conditions exist:

-The HUD Secretary has determined that it is specifically designed for and occupied by elderly persons under a federal, state, or local government program -It is occupied solely by persons who are 62 or older -It houses at least one person who is 55 or older in at least 80% of the occupied units. It also adheres to a policy that demonstrates an intent to house persons who are 55 or older

Conciliation

-When the US Department of Housing and Urban Development receives a complaint, it will start an investigation -Within 100 days, HUD will determine if there is reasonable cause to charge discrimination or it will dismiss the complaint -During the investigation period, HUD can attempt to resolve the complaint. They do that by having the person against whom the complaint was filed promise to remedy the alleged violation

Civil Rights Act of 1866

-Where fair housing law first began -Prohibited housing discrimination based on race

If a person feels like he or she has been discriminated against, how long does that person have to file a complaint?

-With the US Department of Housing and Urban Development: within one year of the alleged act -In state or federal court: within two years of alleged act

***Steering Examples

-You decide to show a white couple properties in areas that are occupied only by other whites -You decide to show African American buyers home that are in integrated areas, or areas occupied only by African Americans

****If a buyer requests to be shown homes surrounded by members of his own race what should you do?

-You need to explain to the buyer that you, ethically and legally, cannot recommend housing based upon race, religion, color, national origin, sex, handicap, or familial status makeup of the neighborhood -You should show them all homes in their price range

Texas Workforce Commission Civil Rights Division

-who Texas residents file complaints with -Statue of limitations on claims is one year from the date of the incident

Legal Responsibilities of a Salesperson: Why they would know the law

1. It's the law, real estate salespersons must obey all federal, state, and local rules and regulations 2. Its a right. Everyone would have an equal opportunity in our country to own or rent the property of his or her choice 3. Reduces risk. Its a risky business to attempt to violation fair housing rules. Besides the penalties, a court case and attorney fees could cost you time, money and loss of license

Housing and Community Development Act

1974 Added sex to the list of protected classes

Fair Housing Amendments Act

1988 Added handicap and familial status

Disability or Handicap

A handicap refers to a physical or mental disability or handicap that substantially limits one or more major life activities

Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc. (Supreme Court of the United States — Argued: January 21, 2015, Decided: June 25, 2015) Case Summary

A violation of any discrimination laws associated with the Federal Fair Housing Act can lead to legal actions against the offending party by the person of the group who felt like they were being discriminated against as well as by governmental agencies like the Department of Justice (DOJ)

Fair Housing Amendments Act (1988)

Added handicap and familial status -If a person has a physical or mental disability/handicap, a property owner may not: -refuse to let the person make reasonable modifications to the dwelling or common use areas so he or she can use the housing -refuse to make reasonable accommodations in rules, policies, practices, or services if necessary for the person to use the housing

Housing and Community Development Act (1974)

Added sex to the list of protected classes

What is the definition of discriminatory advertising?

Advertising that indicates a preference, limitation, or discrimination based on race, color, religion, handicap, sex, familial status, or national origin

***Advertising Awareness: Sex Example

An ad should never read males only, men only, females only, or other like phrases. That is the case unless the ad is describing shared living areas or homes used exclusively as dormitories by educational institutions

Disparate Impact

Can be defined as policies that are considered to be discriminatory if it haas a disproportionate "adverse impact" against any protected class based upon race, nation of origin, color, religious beliefs, sex, familial status, or disability when there are other valid non discriminatory options available

Steering

Channeling homebuyers toward or away from homes in certain neighborhoods in order to preserve or alter the makeup of that neighborhood

Dealing with testers: Don'ts

DONT -attempt to frustrate the tester -assume you have the ability to know if someone is or is not a tester. It is always best to treat all of your prospects as testers. Providing all prospects with equal professional services will keep everyone free from jeopardy -Ask a tester if he or she is testing. The tester doesn't have to admit what he or she is doing to identify the fact that he or she is a tester

Filtering Down

Dwellings that are formally occupied by middle-and upper- income families declined n quality and value and become available to lower income families

Civil Rights Act of 1964

Enacted to prohibit discrimination on the basis of race, color, or national origin in programs and activities receiving financial assistance

Scenario: A buyer is interested in living in an area where he will be surrounded by members of his own race. If someone asks to see the Hispanic only areas, what do you do?

Explain to the buyer that showing her homes in Hispanic only areas, as they requested, would be violating fair housing laws. Remember, showing properties based on the ethnic makeup of the neighborhood could bring about "steering" charge against you

Your Opinion

If a client asks for your opinion, it is illegal to voice that opinion based on race, religion, color, national origin, sex handicap, familial status, or any of the protected class. -"Would you live in this home?" Your response should include factual statements based on various features within the home only -"What do you think about this neighborhood? Your response should include comments about the neighborhoods features in relation to their location within the city, closeness to shopping, or other benefits only.

***Example of rate spread

If a lender is charging a borrower a 5% interest rate while others a similar financial qualifications are borrowing at 4%, then rate spread is 1

Jones v. Mayer

In 1968, the Supreme Court ruled that discrimination on the basis of race is strictly prohibited. There can be no exemptions or exceptions with regard to race

Buchanan v Warley 1917

In the city of Louisville, Kentucky, a state law prohibited blacks from living in neighborhoods where the majority of homes were occupied by whites. It also restricted whites from residing in majority black neighborhoods

What is significant about the Fair Housing Amendments Act of 1988?

It added handicap and familial status to the list of protected classes.

According to the provisions fo the act, companies that the Home Mortgage Disclosure Act covers must keep a

Loan Application Register (LAR)

Blockbusting

Making a profit by persuading owners to sell by telling them that persons of a protected class are moving into the neighborhood. Then suggesting that this move will have detrimental results, such as lowering of the property values, and increase in criminal behavior, or a decline in the quality of the schools in the area

Conciliation Agreement

Must protect both the person filing the complaint and the public interest. If the conciliation agreement is signed, HUD will take no further action not the complaint. However, the HUD has reasonable cause to believe that a conciliation agreement is breached, HUD will recommend that the attorney general file suit

Which of the following activities would NOT be considered discrimination by the ADA?

Offering a loan to a member of a restricted class

Community Reinvestment Act (1977)

Passed by Congress to prevent redlining and to encourage banks and other lenders under federal oversight to help meet the credit needs of all segments of their communities

***Home Mortgage Disclosure Act (HMDA)

Passed in 1975 -Requires financial institutions to maintain and disclose data about home purchases, home purchase pre-approvals, home improvement, and refinance applications involving one to four unit and multi-family dwellings -***Data must be disclosed ANNUALLY

Equal Credit Opportunity Act (ECOA)

Prohibits lenders from discriminating against applicants on the basis of race, color, religion, national origin, sex, marital status, age, or dependency on public assistance

Equal Credit Opportunity Act

Prohibits lenders from discriminating against applicants on the basis of: -Race -Color -Religion -National Origin -Sex -Marital Status -Age -Dependency on public assistance

What kind of houses were called "separate but equal" with a Supreme Court decision?

Racially segregated accommodations

What metric is used to determine if the rate given to the borrower is above a certain threshold of the prevailing rates at the time of the application?

Rate spread

What does the Community Reinvestment Act require community banks to do?

Requires federal financial institution regulators to asses the record of each bank and thrift in helping to fulfill their obligations to the community

***The Community Reinvestment Act

Requires federal financial institution regulators to assess the record of each bank and thrift in helping to fulfill their obligations to the community and to consider that record in evaluating applications for charters or for approval of bank mergers, acquisitions, and branch openings

Home Mortgage Disclosure Act of 1975

Requires financial institutions to maintain and disclose data about home purchases, home purchase pre-approvals, home improvement, and refinance applications Companies covered under HMDA are required to keep a Loan Application Register (LAR). A LAR is where lenders report statistical information each year to insure that lenders are not restricting loans to certain individuals.

Redlining

Restricting the number of loans in certain areas of a community because of its racial or ethnic makeup

Jones V. Mayer

Ruled that discrimination based on the basis of race is strictly prohibited This means there can be no exemptions or exceptions with regard to race

What could happen if one of your sellers declines to show a property to minorities or members of other protected classes?

This is illegal. Both you and your seller can be sued for violating fair housing laws

When advertising by newspaper, how could you avoid an impression of racial steering?

Use a wide variety of newspapers, not just the local or neighborhood paper

***Advertising Awareness: Words or phrases that would be considered discriminatory in advertising

You should never use the following phrases -Couples Only -Empty nesters -Single person -No families -Mature individuals -Senior discount

In addition to, or instead of filing a complaint with HUD, a person may file a suit in

a state or federal court within two years of the alleged violation

During the investigation period, HUD can attempt to resolve the complaint by getting

assurance fro meh person against whom the complaint was filed that he or she will remedy the alleged violation called conciliation

Owners of small, public businesses must remove physical "barriers" that are "readily achievable". "Readily achievable" means easy to accomplish without much difficulty or expense. What is the "readily achievable" requirement based on?

based on the size and resources of the business

***Readily Achievable

means easy to accomplish without much difficulty or expense

Any person who believes he or she has been discriminated against may file a complaint with HUD within

one year of the alleged act