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Mortgage Bankers Association sues to block New Jersey disparate impact rule
The MBA filed the case on Sept. 3 in federal court and argues the rule shifts the burden of proof to lenders and could push them toward race-conscious policies to avoid liability.
The Mortgage Bankers Association filed a federal lawsuit on Sept. 3 to block New Jersey’s new disparate impact discrimination rule, arguing it goes beyond federal fair lending standards. HousingWire reports the MBA says the regulation improperly shifts the burden of proof to lenders and increases pressure for businesses to adopt race-conscious policies to reduce liability risk.
The complaint was filed in the U.S. District Court for the District of New Jersey. It names New Jersey Attorney General Jennifer Davenport and Yolanda N. Melville, director of the state Division on Civil Rights, as defendants in their official capacities, and the New Jersey Office of the Attorney General told HousingWire it had no comment.
The lawsuit focuses on disparate impact liability, a doctrine that allows regulators to challenge facially neutral policies that disproportionately harm protected groups even without proof of discriminatory intent. The MBA contends the rule conflicts with safeguards it says the Supreme Court has allowed, including a robust causation requirement and an approach where the challenger must prove that a less discriminatory, equally effective alternative exists.
According to the complaint, the New Jersey rule lets regulators demonstrate disparity using national census or survey data rather than an individual lender’s own applicant pool, and it does not require showing that disparity is substantial or statistically significant. The MBA also objects to provisions that it says reach policies before they take effect and that treat “achieving diversity or increasing access for underrepresented groups” as a valid justification interest, saying this creates uncertainty and liability inconsistent with federal law and constitutional principles.