House committee reviews H.169; debates immigration-status limits for lenders and landlords

Members of the House General and Housing committee on April 24 reviewed a redraft of H.169, a bill that would add citizenship and immigration status to Vermonts prohibitions on discrimination in housing. Legislative counsel presented new language intended to preserve federal exceptions for lenders and for federally required verification of immigration status while requiring landlords to accept alternatives to Social Security numbers on rental applications.

The revised draft was introduced by Cameron Wood of the Office of Legislative Council, who told the committee it "shall not constitute unlawful discrimination for a creditor to consider a credit applicant's immigration status to the extent such status has bearing on the creditor's rights and remedies regarding loan repayment," language prepared with colleague Maria Ryle of Legislative Council. Ryle said the provision is intended to mirror how federal law and federal agencies treat immigration status in credit decisions and to reduce the risk that state law would expose lenders to suits or interfere with secondary-market practices.

The bill as revised would: require residential rental applications to inform applicants they may provide a Social Security number, an individual taxpayer identification number (ITIN), or an original or copy of a government-issued identification to allow a landlord to conduct a background or credit check; add "citizenship and immigration status" to multiple subsections of the states unfair housing practices sections; and include a clause that verification of immigration status required by federal law would not violate the state prohibition. The draft also includes the lender carve-out cited above.

Why it matters: Committee members said the proposed changes aim to balance anti-discrimination protections for tenants with recognized federal rules and industry practices for lenders and owners. Members expressed concern that a strict prohibition on asking for Social Security numbers could make it harder for landlords and mortgage lenders to obtain reliable credit and criminal-history information, and that lenders face federal and secondary-market constraints (for example, those imposed by Fannie Mae and Freddie Mac) that affect whether a loan can be sold.

Key details and committee discussion

- On credit and underwriting: Ryle told the committee federal law and regulations can permit a lender to consider immigration status when that status has a nexus to repayment or creditors' rights. She and Wood cited two federal authorities discussed by members: 42 U.S.C. (identified in committee as "42 USC 1981" in discussion) and the Equal Credit Opportunity Act. Ryle said the Consumer Financial Protection Bureau and Department of Justice issued a joint statement in October 2023 interpreting the law to limit use of immigration status as a proxy for national-origin discrimination while allowing consideration when it bears on repayment. She cautioned the agencies' guidance is an interpretation and could change.

- On secondary-market sales: Counsel told the committee his research showed Fannie Mae and Freddie Mac purchase loans made to borrowers who are legally authorized to be in the country, so lenders generally can sell loans to the secondary market when the borrower has lawful status. Counsel said that concern about secondary-market eligibility informed the lender carve-out language.

- On landlord use of identifiers: The draft requires landlords conducting background or credit checks to accept one of three items: a Social Security number, an ITIN (described in the discussion as a nine-digit number used for tax purposes), or an original or copy of government-issued identification. The draft also requires rental application forms to notify applicants that they may provide any of the listed items. Committee members discussed whether to specify "current/valid government-issued identification" rather than "any form" to avoid accepting clearly expired or unclear documents.

- On mandatory verification and federal preemption: Several members urged broader language protecting property owners who must comply with federal funding or program requirements (for example, when federal dollars require verification of lawful presence). One member suggested flipping the drafts federal-exception clause so it would affirm that landlords are not required to verify immigration status unless federal law requires it.

- On litigation risk and scope: Counsel warned that, while some court decisions have allowed claims to proceed in cases where lenders or landlords refused to accept applicants without Social Security numbers, case law is not settled on whether protections would apply categorically to people who are unlawfully present. He recommended drafting to reflect current federal regulation and the existing uncertainty.

What the committee asked staff to do

Committee members asked Legislative Council to: (1) reword the federal-exception clause so it better protects landlords who are subject to federal funding or verification requirements, (2) consider narrowing the term "creditor" to "lender" or "lending institution" in the subsection about real-estate financing, and (3) change the rental-application language to specify "current/valid government-issued identification." Counsel said he would prepare another draft incorporating those points and circulate it to the committee.

Ending

No vote was taken. The committee agreed to have Legislative Council prepare a revised draft addressing the drafting questions discussed and to return the bill for further committee consideration.