Now required to publicly report pricing information on home mortgage loans, lenders can expect class-action litigation asserting disparate-impact discrimination claims. Class action lawyers also will scrutinize and likely use the new HMDA pricing data in lawsuits alleging lending discrimination under FHA and ECOA. The authors review some defenses to such claims, the effect of the federal class action fairness act, and the impact of amendments to federal rule 23. Given the likelihood of public scrutiny, examination, investigation and litigation, lenders need to consider taking proactive steps to minimize their risks. The most important aspect of being able to address such issues with respect to the HMDA data is to have an understanding of the facts. This means conducting analyses of HMDA data under appropriate attorney-client privilege and work-product protections. To the extent that such analyses reveal pricing issues, lenders must undertake efforts to understand and address their root causes. Lenders also should develop a credible explanation of their HMDA pricing data that they can share with the public. This effort can be complicated because lenders do not publicly report important data necessary to explain pricing decisions. Nonetheless, lenders must recognize and embrace how important it is to communicate effectively with different audiences about their pricing.
This article was co-authored with Benjamin P. Saul and appeared in the Review of Banking and Financial Services, Volume 21, No. 6, and is reprinted with permission.
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