Date of Issuance: / 4/17/1992
Agency: / FCA
Federal Register Cite: / 57 FR 13635
FARM CREDIT ADMINISTRATION
12 CFR Part 613
RIN: 3052-AB29
Eligibility and Scope of Financing; Nondiscrimination in Lending
ACTION: Final rule.
SUMMARY: The Farm Credit Administration (FCA), by the Farm Credit Administration Board (Board), adopts final regulations amending subpart E of part 613 of FCA regulations, governing nondiscrimination in lending by Farm Credit System (System) institutions. These regulations were published as proposed regulations on January 16, 1992, 57 FR 1882. These final regulations implement changes made in title VIII of the Civil Rights Act of 1968 by the Fair Housing Amendments Act of 1988 (1988 Act). The amendments to part 613 conform FCA's regulations to the requirements of the statute and implementing regulations promulgated by the Department of Housing and Urban Development (HUD). The final rule adds two new protected categories, prohibits discrimination in "residential real estate-related transactions," as defined in the 1988 Act, revises the Equal Housing Lender Poster, conforms complaint processing procedures, and makes technical amendments referencing HUD's fair housing regulations and the Equal Credit Opportunity Act.
EFFECTIVE DATE: The regulations shall become effective upon the expiration of 30 days after publication during which either or both houses of Congress are in session. Notice of the effective date will be published in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
John J. Hays, FCA Examiner, Policy and Risk Analysis Division, Office of Examination, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4258, TDD (703) 883-4444, or
Christine C. Dion, Attorney, Corporate and Regulatory Law Division, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-4444.
SUPPLEMENTARY INFORMATION:
I. General
Prior to 1988, title VIII of the Civil Rights Act of 1968, 42 U.S.C. 3601 et seq., made it unlawful to discriminate in any aspect of the sale, rental, and financing of a dwelling because of race, color, religion, sex, or national origin. The Fair Housing Amendments Act of 1988, Public Law 100-430, 102 Stat. 1619 (1988 Act), amended title VIII to (1) add prohibitions against discrimination in housing on the basis of handicap and familial status (having one or more children under the age of 18), (2) expand coverage of the prohibitions by substituting the term "residential real estate-related transactions" for "financing" of housing, (3) strengthen administrative enforcement procedures and private civil rights of action, and (4) increase monetary damages that can be awarded where discriminatory housing practices are found. The 1988 Act, effective March 12, 1989, designated title VIII as the Fair Housing Act. The Department of Housing and Urban Development (HUD), pursuant to its authority for the administration and enforcement of the Fair Housing Act, published regulations on January 23, 1989, 54 FR 3232, which interpret the scope of the coverage provided and the nature of activities made unlawful by the 1988 Act, and set forth procedures applicable to the receipt and processing of complaints and the initiation and conduct of formal enforcement proceedings.
Section 808(d) of the Fair Housing Act requires all agencies (including any Federal agency having regulatory or supervisory authority over financial institutions) to administer their programs and activities relating to housing and urban development in a manner to further affirmatively the goal of fair housing and to cooperate with the Secretary of HUD to further such purposes.
Consistent with the requirements of section 808(d) of the Fair Housing Act, the FCA proposed amendments to its regulations prohibiting discrimination in lending to conform with changes made in title VIII by the 1988 Act and with HUD's implementing regulations. The proposed amendments also reflected the lending and advertising prohibitions of the Equal Credit Opportunity Act (ECOA) and Regulation B, 12 CFR part 202, of the Board of Governors of the Federal Reserve System (FRB), which are applicable to System institutions. In addition, the proposed amendments set forth the required text of the Equal Housing Lender Poster, that must be publicly displayed by System institutions, showing the prohibitions contained under title VIII, as amended by the 1988 Act, and under the Equal Credit Opportunity Act of 1974, Public Law 93-495, as amended by the Equal Credit Opportunity Act Amendments of 1976, Public Law 94-239, 15 U.S.C. 1601, et seq. See 57 FR 1882 (January 16, 1992). Comments concerning the proposed amendments to the nondiscrimination in lending regulations were received from the Farm Credit Council (FCC) and a Farm Credit Bank (FCB). The FCC stated that its comments represented the collective and consensus viewpoints of its membership. The FCB commented that it had participated in the development of the Farm Credit System's comments to the proposed nondiscrimination in lending regulations. The FCB noted that it concurred with the comments submitted on behalf of the System by the FCC.
II. Discussion of Comments
The FCC commented that the reference in proposed § 613.3150(a) to "other financial services" should be changed to read "other financial assistance" in conformance with the definition of "residential real estate-related transaction" in proposed § 613.3145(e). It also noted that the word "residential" should precede the phrase "real estate-related transaction" in proposed § 613.3150(a).
The FCA proposed to amend § 613.3150(a) to prescribe a general prohibition against discrimination in lending in residential real estate-related transactions on any prohibited basis as defined by the Fair Housing Act. The section incorporates the statutory definition of "residential real estate-related transaction" set forth in § 613.3145(e). The FCA agrees with the comment that the phrase "other financial assistance" should be substituted for the phrase "other financial services" to mirror the language of the statute. The word "residential" has also been added to correspond to the statutory definition set forth in § 613.3145(e). Paragraph (a) of § 613.3150 of the final regulation has been revised accordingly.
The FCC also noted that paragraph (b) of proposed § 613.3150 addresses discrimination "in any aspect of a credit or other financial service transaction." It stated that such coverage would extend not only to real estate loans, but also production or commercial loans, and other noncredit financially related services as well. The FCC asserted that such coverage extends beyond the Fair Housing Act and its implementing regulations, which apply only to real estate-related transactions. Additionally, the FCC claimed that, although non-real estate credit transactions are within the scope of the ECOA and Regulation B, the FCA cites no authority for the proposed coverage of financially related services, which are subject to neither the Fair Housing Act nor the ECOA.
The FCA does not agree with the comment that coverage of real estate and production or commercial loans in paragraph (b) of proposed § 613.3150 extends beyond the Fair Housing Act and HUD's implementing regulations. The FCA agrees that coverage under the Fair Housing Act and HUD's implementing regulations only extends to "residential real estate-related transactions." However, as was noted in the preamble to the proposed regulation, paragraph (b) of § 613.3150 prohibits discrimination on any prohibited basis as defined by the ECOA and Regulation B. The ECOA applies to all credit, business or personal, without regard to the nature or the type of credit or creditor. All business credit, that is, credit extended for business or commercial (including agricultural) purposes, is subject to the general rule (12 CFR 202.4) under Regulation B that: "A creditor shall not discriminate against an applicant on a prohibited basis regarding any aspect of a credit transaction." Section 202.3 of Regulation B sets forth limited exceptions and modified requirements for business credit. However, in all other respects, Regulation B applies to business credit, which includes production or commercial loans. Furthermore, real estate loans, as credit transactions, are also subject to the ECOA and Regulation B. Real estate loans, other than "residential real estate-related transactions," are not subject to the Fair Housing Act or HUD's implementing regulations. However, "residential real estate-related transactions" are subject not only to the Fair Housing Act and HUD's implementing regulations but also, as credit transactions, to the ECOA and the FRB's implementing regulation. Coverage of "residential real estate-related transactions" under the Fair Housing Act does not preempt coverage under the ECOA. n1
n 1 Section 12 of Public Law 100-430 provides that: "Nothing in the Fair Housing Act as amended by this Act [Pub. L. 100-430] limits any right, procedure, or remedy available under the Constitution or any other Act of the Congress not so amended."
The FCA also does not agree with the comment that financially related services are subject to neither the Fair Housing Act nor the ECOA. The FCA notes that a financially related service involving the appraisal of residential real property would be considered a "residential real estate-related transaction," (§ 613.3145(e)(2)), subject to the nondiscrimination prohibitions of the Fair Housing Act and HUD's implementing regulations, as prescribed in paragraph (a) of § 613.3150. Furthermore, a financially related service involving a credit transaction is subject to the nondiscrimination prohibitions of the ECOA and Regulation B, as prescribed in paragraph (b) of § 613.3150. A noncredit financially related service is not subject to the ECOA and Regulation B.
In summary, the ECOA and Regulation B prescribe nondiscrimination prohibitions for any aspect of a credit transaction. This coverage would include commercial loans, real estate loans, and financial services which involve a credit transaction. Such coverage does not extend the coverage of the Fair Housing Act and HUD's implementing regulations beyond the scope of "residential real estate-related transactions." Also, coverage under the ECOA for "residential real estate-related transactions" is not preempted by the Fair Housing Act. Accordingly, the FCA has determined that the phrase "any aspect of a credit or other financial service transaction" contained in the proposed paragraph (b) of § 613.3150 is applicable to the nondiscrimination prohibitions of the ECOA and Regulation B. However, for purposes of clarification, the phrase has been modified to read "any aspect of a credit transaction or a financial service involving a credit transaction."
The FCC further commented that the phrase "other financial service" in paragraph (c) of proposed § 613.3150 should be changed to read "other financial assistance" to more closely parallel the definition of "residential real estate-related transaction."
Paragraph (c) of § 613.3150 was proposed to list several examples of lending practices that would be prohibited under the section. As has been noted, paragraph (a) of the section prohibits discriminatory lending under the Fair Housing Act and HUD's implementing regulations. Paragraph (b) of the section prohibits discriminatory lending under the ECOA and Regulation B. Because paragraph (c) does not include all prohibited practices and is not confined to the requirements of the Fair Housing Act, the FCA has determined to retain the reference in the paragraph to a financial service. However, the phrase "other financial service" has been revised to read "a financial service involving a credit transaction," to conform with its modification in paragraph (b) of § 613.3150.
The FCC asserted that proposed § 613.3151, barring discrimination in connection with all applications as prohibited by the Fair Housing Act and the ECOA, exceeded the terms of the ECOA, which does not include the categories of familial status and handicap. The FCC noted that at all other points in the proposed regulations, the FCA had carefully adhered to the differences in the scope of the two statutes. The FCC also questioned the FCA's authority to include the word "service" in the section as it would extend the regulation's coverage to noncredit services.
Section 613.3151 was proposed to prohibit discrimination against an applicant for an eligible loan or other eligible service on any prohibited basis as defined by the ECOA and the Fair Housing Act, to emphasize the importance of promoting the availability of credit to all creditworthy applicants. The FCA notes that the ECOA and the Fair Housing Act each have seven categories of individuals protected against discrimination. Five of the seven categories are protected under both the ECOA and the Fair Housing Act. The five categories the statutes have in common are race, color, religion, sex, and national origin. The Fair Housing Act has two additional categories of familial status and handicap. The ECOA has two additional categories of age and marital status. "Residential real estate-related transactions" are subject not only to the seven categories of the Fair Housing Act, but also, as credit transactions, to the seven categories of the ECOA. Credit transactions, other than "residential real estate-related transactions," are subject to the seven categories of the ECOA but are not subject to the familial status and handicap categories of the Fair Housing Act.
In order to clarify the protected categories of applicants under the Fair Housing Act and ECOA, the FCA has revised § 613.3151 in the final regulation to include paragraphs (a) and (b). Paragraph (a)(1) of the section sets forth the categories protected from discrimination under the ECOA and Regulation B. Paragraph (a)(2) of the section sets forth the categories protected from discrimination under the Fair Housing Act and HUD's implementing regulations. Paragraph (b) sets forth when the provisions of paragraph (a) of the section are applicable. Additionally, § 613.3151 has been revised in response to the FCC's concern regarding possible extension of the terms of either statute to noncredit transactions. Specifically, the word "credit" has been added before the word "service."
The FCC acknowledged in its comment letter that the FCA had stated in the preamble to the proposed regulation that prohibitions of the Fair Housing Act regarding familial status do not apply with respect to housing for older persons. The FCC requested that § 613.3160, entitled "Nondiscriminatory advertising," specifically exempt advertising from the familial status prohibition in respect to housing for older persons.
Section 807(b)(1) of the Fair Housing Amendments Act (42 U.S.C. 3607(b)(1)) exempts "housing for older persons" from the prohibitions against discrimination because of familial status. The statutory definition of "housing for older persons" under the 1988 Act comprises three categories of housing: (1) Housing provided under any State or Federal program that the Secretary of HUD determines is specifically designed and operated to assist elderly persons; (2) housing intended for, and solely occupied by, persons 62 years of age or older; and, (3) housing intended for, and solely occupied by, at least one person 55 years of age or older per unit, provided that various criteria are met (section 807(b)(2)). Subpart E of HUD's implementing regulations effectuates the exemption in the 1988 Act relating to housing for older persons (24 CFR 100.300-100.304). Part 109 of HUD's regulations, entitled "Fair Housing Advertising," states that the prohibitions regarding familial status do not apply with respect to "housing for older persons," as defined in section 807(b) of the Fair Housing Act (24 CFR 109.5). Section 109.20(b)(7) of HUD's regulations also states that nothing in part 109 restricts advertisements of dwellings which are intended and operated for occupancy by older persons and which constitute "housing for older persons" as statutorily defined.
As was noted by the FCC, the preamble of the proposed regulation advised that housing for older persons was exempted under the Fair Housing Act. However, the FCA determined not to specifically set forth the exemption in the proposed regulation. As had been discussed earlier, "residential real estate-related transactions," as credit transactions, are subject to the prohibitions against discrimination not only of the Fair Housing Act but also of the ECOA. The ECOA prohibits discrimination against applicants on the basis of age. The ECOA does not exempt real estate or housing loans for elderly or older persons from its prohibition against discrimination on the basis of age. The FCA continues to believe that specific inclusion of the Fair Housing Act's exemption in the final regulation may create the impression that real estate-related transactions relating to housing for older people are not only exempt under the Fair Housing Act but also are not subject to the ECOA's prohibitions on the basis of age. Therefore, rather than include the exemption in § 613.3160 of the final regulation, the FCA has chosen to incorporate the exemption by reference to its applicable statutory and regulatory provisions.
The FCC expressed concern regarding the use of the word "dwelling" in the proposed regulation and in the Equal Housing Lender Poster as prescribed by the regulation. The FCC claimed that the usage of the word "dwelling" suggests that the scope of the HUD-related requirements extends beyond the definition of "residential real estate-related transactions" to what are traditionally considered "farm" loans. The FCC requested that the FCA acknowledge that it does not intend such an extension.