New Article: Robert G. Schwemm & Jeffrey L. Taren, Discretionary Pricing, Mortgage Discrimination, and the Fair Housing Act, 45 Harv. Civil Rights – Civil Liberties L. Rev. 375 (2010). Abstract below:
For generations, mortgage lending has always been the gateway to theAmerican dream of homeownership, and, historically, has also been characterized by widespread discrimination against racial and ethnic minorities and theircommunities. Mortgage discrimination in the modern era has often been accomplished through a technique known as discretionary pricing, in which lendersallow their loan officers and brokers to increase borrowers’ costs from an objectively determined base rate. In the past decade alone, discretionary pricing hascost minority homeowners billions of dollars in extra payments, which, in turn, has led these minorities to suffer higher foreclosure rates than whites and hasreversed recent gains in their homeownership rates. This Article explores the civil rights implications of discretionary pricing,which is currently being challenged in a series of nationwide class-action lawsuitsbased primarily on the federal Fair Housing Act. We begin with somebackground on the mortgage industry’s performance in recent years and a survey of the evidence of the discrimination that has existed within this industry. We then review current legal responses to this discrimination, with a particular focus on the series of FHA-based class actions that have focused on the racial impact of discretionary pricing. We conclude with a discussion of non-litigation reforms that are also needed to ensure that the home-finance industry provides aless discriminatory marketplace in the future.
Poverty Law 