Regulators unite on targeted lending programs

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The interagency statement is the latest effort by regulators to give lenders the green light when it comes to special purpose credit programs.

In December 2021, HUD resolved longstanding questions about whether special purpose programs would violate the Fair Housing Act.

A year earlier, the CFPB provided guidance on how for-profit organizations could implement special purpose credit programs without violating the ECOA. The watchdog agency provided clarification on the type of research and data needed to create a targeted lending program.

CFPB officials have also since made public statements in support of the programs. Acting Director David Uejio explained in September 2021 how special purpose credit programs “serve as an important tool” for mortgage lenders to help underserved borrowers.

The special-purpose credit programs, Uejio said, are “also a recognition that the government cannot solve this problem alone.”

For the programs to have an impact — as Congress envisioned 45 years ago — regulators need buy-in from lenders. Yet mortgage lenders are still hesitant to implement targeted lending programs. The CFPB does not have data on the number and variety of SPCPs currently in force, an agency spokesperson said.

Mortgage lenders still have reservations about implementing targeted lending programs. The fact that there is no safe haven for special-purpose credit programs is a sticking point, said Andy Arculin, partner at Vide Rome LLPwho was previously senior counsel in the CFPB’s Office of Regulation.

Lenders are expected to implement the programs, Arculin said, but they can then be reviewed for compliance or sued for violating the ECOA.

“If regulators were willing to give someone a decision with a safe harbor behind it, lenders would be much more willing to expand the programs,” Arculin said. “If you don’t have assurance that it’s bulletproof or kosher, that’s a risk.”

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