Government sues mortgage company for ‘discrimination’ over nondiscriminatory business decisions

In November 2024, the federal government alleged that a Texas mortgage company’s lending practices discriminated against Hispanic borrowers—an allegation the company, Willow Bend, vehemently denies. 

When offering home loans to customers, Willow Bend prices loans according to both the borrower’s qualifications and the mortgage market in the area where the home is located. In other words, your initial mortgage rate will depend in part on the neighborhood you want to buy a house in. It’s a calculation Willow Bend has used for its 30-plus years in the mortgage business. Any similarly qualified borrowers who want to buy a house in an area are offered the same rates, regardless of their race, ethnicity, or national origin. There is no discrimination. Full stop. 

But the Office of Fair Housing and Equal Opportunity—a federal agency within the Department of Housing and Urban Development (HUD)—filed a housing discrimination complaint against Willow Bend in November. The complaint is based on statistical regression analyses which, according to HUD, show that Willow Bend’s lending model led it to charging higher mortgage prices to customers in majority-Hispanic areas in 2020 and 2021. These studies rely exclusively on “disparate impact” analysis, which holds businesses liable if the results of a process lead to differences among groups—even if there is no evidence of discrimination. Because of the statistical disparate impact, HUD has charged Willow Bend with violating the Fair Housing Act and claims that Willow Bend should have to change its business model, pay damages and penalties, and pay for all its employees to take Fair Housing Act training. They face tens of millions of dollars in penalties and compliance costs.  

To be clear: The government is not alleging that Willow Bend intended to discriminate against anyone, including Hispanic customers. Despite a lengthy investigation into Willow Bend’s practices, HUD discovered no evidence whatsoever that Willow Bend considered the ethnicity or national origin of its customers when setting prices. But because Willow Bend’s pricing policy led to borrowers in majority-Hispanic areas paying higher prices, HUD says Willow Bend violated the Fair Housing Act, which “prohibits discrimination by direct providers of housing.” A week before the end of the Biden administration, HUD followed up on its initial complaint with a formal charge against the company. 

Now Willow Bend—which categorically denies treating borrowers differently on the basis of ethnicity or national origin—will defend itself in HUD’s in-house adjudication proceeding, where an administrative law judge will rule on the case. HUD claims that Willow Bend should have to change its business model, pay damages and penalties, and pay for all its employees to take Fair Housing Act training. 

Pacific Legal Foundation is representing Willow Bend free of charge in the proceeding. The government cannot charge companies with discrimination based solely on whether their decisions lead to unequal outcomes among groups.