The Mortgage Bankers Association filed a civil lawsuit against the New Jersey attorney general over the state's disparate-impact discrimination rules, claiming they pose a constitutional risk and undermine existing safeguards aimed to protect businesses.

In a complaint filed Thursday in a federal court for the district of New Jersey, MBA said it was pursuing the case on behalf of members who conduct business in the Garden State. The rules, which took effect in late 2025, violate the equal protection clause in the 14th Amendment, the trade group alleged. 

The case has the potential impact to alter mortgage companies' business approach in New Jersey and other states when confronted with a range of fair-lending laws to maintain compliance. As federal oversight loosens in the second Trump term, some state officials are seeking to fill the regulatory void with their own set of more stringent rules. 

"MBA is taking this action to prevent regulatory overreach and disparate-impact standards that go beyond established federal protections. We will continue to support strong fair-lending and fair-housing protections and equitable access to credit, while defending a regulatory framework that is clear, consistent and grounded in the law," said the association's President and CEO Bob Broeksmit in a statement sent to National Mortgage News.  

A representative from the attorney general's office declined to comment. 

How the disparate-impact rules affect home lending

Named as defendants in the case are New Jersey Attorney General Jennifer Davenport, as well as the director of the state's division on civil rights, Yolanda Melville. The law was enacted through executive administration rulemaking, rather than through a legislative process, and came months after President Trump condemned the idea of disparate impact and ordered officials to strike it from regulations.   

Outside of housing and banking, the rules also touch on potential discriminatory outcomes that occur in hiring, public accommodation and contracting. 

Lawyers for MBA labeled New Jersey the most expansive and aggressive disparate impact

regime in the nation, based on the language in the regulation. 

Any business entity could be found in violation if a complaint leads to a determination that a decision or strategy propagated disparate impacts, regardless of intent. As written, regular word-of-mouth referrals from real estate agents could be deemed discriminatory if their guidance skews toward any single demographic and excludes New Jersey residents of protected classes.   

Those determinations cross a line, MBA claimed. Lenders are put in an "untenable position of having to prove a negative — that no less discriminatory alternative exists — or face liability when neutral, merit-based practices produce different outcomes across demographic groups," Broeksmit claimed.

Currently, safeguards also exist that require a complainant to specifically identify policies that constitute discrimination, instead of just pointing at undesirable outcomes. 

With the law as backdrop, New Jersey lenders may end up being forced to make decisions based on race to comply, MBA also claimed. 

"Without adequate limitations, a disparate impact regime pressures businesses to alter decisions to engineer a demographically acceptable bottom line; precisely the racial balancing the court has condemned and federal law forbids," MBA's attorneys wrote in reference to past legal decisions.  

MBA is asking the court to deny New Jersey's ability to enforce its rules, declare them unconstitutional and state that existing federal laws preempt those put forward by states.