Yes, we believe that you may vary interest rates and loan terms for loans secured by manufactured homes, provided that these policies are rooted in valid business considerations that have been carefully documented.

We recommend monitoring your manufactured home loans for signs of a disparate impact on protected classes and geographical areas (for example, where a particular racial group or geographic area disproportionately relies on manufactured home loans, resulting in that group paying higher interest rates). If examiners view your lending patterns as evidence of a disparate impact, your bank will have to justify these policies as “business necessities.” Under the FFIEC’s Interagency Fair Lending Procedures, a lender can demonstrate a business necessity by documenting relevant business factors for a policy, and those factors can include “cost and profitability.” With careful documentation of those relevant factors, your bank should be able to mitigate the fair lending risks of these policies.

For resources related to our guidance, please see:

• FFIEC Interagency Fair Lending Procedures, page iv (“When a lender applies a racially or otherwise neutral policy or practice equally to all credit applicants, but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis, the policy or practice is described as having a ‘disparate impact.’ . . . The fact that a policy or practice creates a disparity on a prohibited basis is not alone proof of a violation. When an Agency finds that a lender’s policy or practice has a disparate impact, the next step is to seek to determine whether the policy or practice is justified by ‘business necessity.’ The justification must be manifest and may not be hypothetical or speculative. Factors that may be relevant to the justification could include cost and profitability. Even if a policy or practice that has a disparate impact on a prohibited basis can be justified by business necessity, it still may be found to be in violation if an alternative policy or practice could serve the same purpose with less discriminatory effect.)

• HUD Fair Housing Act Regulations, 24 CFR 100.500 (“Discriminatory effect prohibited. Liability may be established under the Fair Housing Act based on a practice’s discriminatory effect . . . even if the practice was not motivated by a discriminatory intent. The practice may still be lawful if supported by a legally sufficient justification, as defined in paragraph (b) of this section. . . . (b) (1) A legally sufficient justification exists where the challenged practice: (i) Is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests . . . ; and (ii) Those interests could not be served by another practice that has a less discriminatory effect.”)