Legal & Legislative Update – September 30, 2013

Published on: September 30, 2013

LOOKING UP.  The condominium conversion market is beginning to show signs of life. Developers who completed apartment projects a year or two ago are positioned ideally to capitalize on the growing demand for condominium units, analysts say.

EXTREMELY UNPREPARED.  Insurers are well-prepared to handle extreme weather events as they occur, but not nearly as well-positioned to cope with the ongoing “base-line” challenges created by climate change, a report by Ceres, a nonprofit advocate for environmental leadership, has concluded.

YES, WE WON’T NEED A BAILOUT.  After insisting for months that a bail-out wouldn’t be needed, the Federal Housing Administration has requested one – nearly $2 billion, to be precise — the first ever in its 79-year history.

DISPARATE UPKEEP.  The Fair Housing Alliance has added five more cities to the list of those in which the advocacy group claims to have found evidence that Bank of America discriminated against minority neighborhoods in the upkeep (or lack of it) of foreclosed properties.

E-MAIL PRIVACY.  As more detail emerges about the data-gathering activities of the National Security Administration (NSA), technology and Internet companies and consumer privacy advocates are supporting proposed legislation that would make it more difficult for government officials to seize e-mails.

BOTH SIDES NOW.  Economists are becoming more upbeat about the outlook, but some consumers apparently haven’t gotten that memo. Only 27 percent of the respondents to a recent Bloomberg News poll said they expect the economic recovery to gain steam. Respondents to a BankRate.com poll, who presumably did get the memo, were more upbeat, at least about the housing market: 65 percent of these upper-middle income respondents said they expect home prices to rise over the next 12 months.

 

LEGAL BRIEFS

 

DISPARATE DEBATE. Barring a last-minute settlement ─ still possible but unlikely ─ the U.S. Supreme Court is going to address an issue that has long worried financial institutions: The possibility that they might be sued for violating fair lending laws because lending policies that are themselves non-discriminatory have an unintended “disparate impact” on minorities.

The pending case, (Mount Holly v. Mt. Holly Garden Citizens Action Inc.), which the High Court has agreed to hear, does not specifically involve Fair Lending laws. It centers, rather, on a Fair Housing Act dispute between Mount Holly, New Jersey and residents of a minority neighborhood the town has deemed “blighted” and in need of redevelopment.

Residents opposing the redevelopment contend that demolishing existing dwellings and replacing them with primarily market-rate housing (some of which would be reserved for low-income residents) would have a disproportionately negative impact on Blacks and Hispanics, thus violating the Fair Housing Act.

The key question before the court: Do minorities claiming discrimination under the Fair Housing Act have to demonstrate that a policy or practice was itself discriminatory, or is it enough to show that the policy had a discriminatory impact?

Federal regulators and consumer advocacy groups have relied heavily on disparate impact in alleging violations of fair lending laws by financial institutions. A ruling rejecting the disparate impact theory for Fair Housing claims would affect the fair lending claims as well, which is why several financial industry trade groups have submitted amicus briefs supporting Mount Holly’s argument that the laws bar intentional discrimination only, not unintended discriminatory effects.

The same legal issue arose two years ago in St. Paul, Minnesota, when property owners argued that aggressive enforcement of local building codes would have a disparate impact on the availability and cost of housing in low-income and minority neighborhoods.

That battle also seemed to be heading for the Supreme Court, but anticipating that the court’s 5-4 conservative majority would almost certainly jettison the disparate impact theory, seriously weakening both fair lending and fair housing enforcement efforts, the Department of Justice intervened, persuading St. Paul officials to settle the dispute out of court. The Obama administration and civil rights groups are hoping a settlement will avoid this pending Supreme Court encounter as well.

“We have wanted to settle this case from day one,” Olga Pomar of South Jersey Legal Services, which is representing the residents, told USA Today. “We think that continuing this litigation is not in anyone’s interest.”

Negotiations between the plaintiffs and Mount Holly officials are continuing, but so are their preparations for oral arguments in December.

 

WORTH QUOTING:A high-stakes showdown…is playing out in a climate of chaos, infighting and unpredictability that is extraordinary even by congressional standards.” ─ From a Huffpost article describing the down-to-the-wire Congressional budget-bickering threatening to shut down the Federal government (or that did shut it down, if that happens before we post).