While Donald Trump is issuing executive orders and other rules to remove critical civil rights protections, granting private businesses greater freedom to do as they please, at least some mortgage lenders are not taking what he is offering.  There are three reasons why these lenders do not want these “gifts.” First, such executive actions do not change the law.  Second, a subsequent administration can simply retract those actions and restore the previous rules.  And third, some lenders support the requirements Trump is attempting to repeal. This is particularly evident when it comes to debates over the disparate impact standard of civil rights laws and appraisal bias.

In April, Trump signed an executive order ending enforcement of the disparate impact standard of discrimination.  This is a concept that basically says a firm can be guilty of unlawful racial or ethnic discrimination even if no intent to discriminate is proven. If a policy or practice adversely affects a protected group member the defendant would have to demonstrate that the policy or practice served a legitimate business objective.  Even if it did and there is an alternative approach that would serve the same business objective but is less discriminatory, failure to adopt that alternative may constitute a violation of law.

The Supreme Court established this standard of discrimination in the area of employment in the 1971 case of Griggs v. Duke Power.  It further confirmed this principle in housing in the 2015 case of Texas Department of Housing and Community Affairs v. Inclusive Communities Project.  The Biden Administration adopted rules clarifying the application of disparate impact to housing but the Trump Administration then retracted those rules.  But as The American Banker reported in May, “Trump’s April 23 executive order does not change the law.  It only changes – for the time being – how certain laws are enforced by the federal government.” These actions create uncertainty for housing and housing service providers including mortgage lenders, and a back-and-forth they would like to avoid, particularly since the law itself has not changed.  Consequently, as The American Banker stated, “To play it safe, they may just leave their lending policies unchanged.”

As Chris Willis a partner at the law firm Troutman Pepper Lock who advises financial firms facing government investigations observed:

If you go to the business and say “OK, all this stuff in underwriting we told you not to do it is now fair game, but you may have to turn it off again in four years, the business doesn’t want to do that because that’s very disruptive to them.  They don’t want to be flipping back and forth like a weather vane in the political winds.

A similar dynamic plays out in recent efforts to eliminate racial and ethnic bias in home appraisals.  The Biden Administration created the Property Appraisal and Valuation Equity (PAVE) Task Force which issued rules to strengthen education and licensing requirements for appraisers and eliminate discriminatory biases in appraisal practices.  Trump eliminated many of these requirements.  Bloomberg reported in August that some of the biggest mortgage lenders (including JP Morgan Chase & Co., Bank of America Corp. and US Bancorp) said they would make no changes as a result of the freedoms Trump offered.

Not only do at least some financial service providers understand that Trump’s executive orders do not change the law, and not only do they want to avoid the back-and-forth that can result from serial executive orders, but in some cases, they understand that new, pre-Trump rules serve their business interests. Appraisal bias is costly for many engaged in the housing market.

 If appraisals are too low, meaning below the price agreed upon by the buyer and seller, which research evidence indicates is more likely to occur in low-income and minority communities, deals for home purchases fall through.  Buyers don’t get their homes.  Sellers don’t get the proceeds from the sale.  The racial wealth gaps increase. And lenders lose fees as well as the time they invested in efforts to make those deals work.  All parties benefit from accurate appraisals.  In July, Senator Raphael Warnock proposed legislation to strengthen protections against appraisal bias that was endorsed by the National Association of Mortgage Brokers which represents more than 500,000 mortgage brokers nationwide.  Its president, Jim Nabors, said the bill was critical for ensuring fairness for homebuyers and stated “Our entire board of directors and membership applaud Senator Warnock.”

At least some lenders understand that the “freedoms” Trump is offering are not always beneficial.  And the very concept of freedom from this perspective needs revisiting. As Joseph Stiglitz observes in his 2024 book The Road to Freedom: Economics and the Good Society, freedom “to” is often as important as freedom “from.”  That is, freedom to realize the amenities of the good life for the majority is more important than freedom from government rules for the privileged. The rules Trump is attempting to repeal often provide the freedoms “to” that justice demands and at least some financial service firms understand that they  serve their interests as well.

Freedoms “from” for some often result in severe costs for the many. As Stiglitz notes, quoting Oxford philosopher Isaiah Berlin, “Freedom for the wolves has often meant death to the sheep.”

More lenders should speak out in this spirit.  Doing so will benefit these firms and the communities they serve.

Gregory D. Squires is a research professor and professor emeritus in the Department of Sociology at George Washington University.