Since at least 2007, some in the the mortgage lending industry have been concerned that the federal Home Mortgage Disclosure Act (“HMDA”), which mandates data reporting regarding loan applications and loan terms, would be used by plaintiffs’ counsel as supposed evidence of racially biased mortgage lending decisions or mortgage lending terms.
Yesterday, while not mentioning HMDA at all, a putative class action was brought in the U.S. District Court, D. Minn. (assigned to Judge Donovan Frank) along these lines by African American homeowners attempting to bring claims on behalf of all similarly situated homeowners under the Equal Credit Opportunity Act (ECOA), the Fair Housing Act, and the Civil Rights Act. (Only last month, I’d presented at a CLE and noted that, in 2008, I could not locate a single ECOA lawsuit in the District of Minnesota.)
I expect Plaintiffs will encounter a very serious and multi-pronged defense to their claims; among other things, plaintiffs in such cases (and these plaintiffs in particular) rely on an agency relationship between mortgage lenders and mortgage brokers. Under the law and under the normal fact pattern for these relationships, however, this can be a stretch. On the other hand, at first blush, this would not appear to be a case that the Defendant can easily dispose of at the outset on a motion to dismiss.