The Mortgage Bankers Association (MBA) has filed a lawsuit challenging New Jersey's disparate impact discrimination rule, arguing it unlawfully shifts the burden onto lenders and encourages race-based decision-making, potentially conflicting with federal law.
This lawsuit highlights a significant legal battle over fair lending practices, with the MBA arguing that New Jersey's rule overreaches federal protections and could force lenders into discriminatory decision-making, while state regulators aim to prevent policies that negatively impact protected groups.
The Mortgage Bankers Association (MBA) has filed a lawsuit in the U.S. District Court for the District of New Jersey to block a state rule on disparate impact discrimination. The MBA contends that the rule, enacted in December, unlawfully shifts the legal burden onto lenders and pressures them into race-based decision-making, which they argue is inconsistent with federal law and constitutional principles.
The lawsuit, filed on September 3, names New Jersey Attorney General Jennifer Davenport and Yolanda N. Melville, director of the state Division on Civil Rights, as defendants. The core of the dispute lies in the doctrine of disparate impact liability, which allows regulators to challenge neutral policies that disproportionately harm protected groups, even without proof of discriminatory intent.
The MBA argues that New Jersey's rule goes beyond the safeguards established by the Supreme Court, such as robust causation requirements and the ability for businesses to defend policies that advance legitimate interests. The trade group claims the regulation forces businesses into a "double bind," making race-conscious policies the only sure way to avoid liability. Specifically, the MBA objects to the rule's allowance of national census data to show disparity, its lack of a requirement for substantial or statistically significant disparity, and its treatment of "achieving diversity" as a valid justifying interest.
MBA president and CEO Bob Broeksmit stated that the regulation puts lenders in an "untenable position" of having to prove a negative. The MBA is seeking a declaratory judgment and an injunction to block the rule's enforcement, asserting it violates the Equal Protection Clause by coercing race-based decisions and is preempted by federal law, including the Fair Housing Act and the Equal Credit Opportunity Act.