The Covenant Homeownership Program lawsuit, Foundation Against Intolerance and Racism v. Walker, is a federal Equal Protection challenge to Washington’s race-conscious down payment assistance program, and it is now running alongside a separate U.S. Department of Housing and Urban Development investigation into the same program. A federal judge refused in February 2026 to halt the program while the lawsuit continues, and the program is still making loans.
What the Program Does
The Covenant Homeownership Program launched on July 1, 2024, after the Washington legislature passed the Covenant Homeownership Act in 2023. It offers zero-interest loans covering up to 20 percent of a home’s purchase price (or $150,000), plus closing costs, repaid when the home is sold or refinanced. A 2025 amendment added full loan forgiveness after five years for borrowers earning 80 percent or less of area median income.1NCSHA. Washington Homeownership: Empowering New Buyers
Eligibility is the piece that drew the legal challenge. To qualify, an applicant must be a first-time homebuyer at or below 120 percent of area median income who either lived in Washington before April 11, 1968, or descends from someone who did, and that Washington ancestor must have belonged to one of the racial or ethnic groups the legislature identified as harmed by discriminatory covenants: Black, Hispanic, Native American, Alaska Native, Native Hawaiian or other Pacific Islander, Korean, or Asian Indian.2Housing Partnership Network. Washington Covenant Homeownership Act Case Study3Washington State Housing Finance Commission. Covenant Homeownership Executive Summary
Japanese and Chinese Americans are not among the qualifying groups. The program’s architects excluded them because their current homeownership rates are at or above the rate for White residents, even though the state’s own commissioned study documented historical discrimination against both communities, including Washington’s 1921 Alien Land Bill.4Reason. Washington Sued for Racially Conscious Homeownership Program That eligibility gap became a central talking point for the program’s critics.
The FAIR v. Walker Lawsuit
The Foundation Against Intolerance and Racism, a New York–based nonprofit represented pro bono by the Pacific Legal Foundation, filed suit on October 29, 2024, in the U.S. District Court for the Western District of Washington. The defendant is Steve Walker, executive director of the Washington State Housing Finance Commission, which administers the program. The case number is 2:24-cv-01770-JHC.5Pacific Legal Foundation. FAIR Homebuyers Washington Discrimination6Pacific Legal Foundation. Federal Lawsuit Aims to End Racial Discrimination in Housing Assistance
FAIR argues that gating a public benefit on the applicant’s race violates the Equal Protection Clause of the Fourteenth Amendment. The complaint asks the court to order the state to run the program without regard to applicants’ race.7Seattle Times. WA Program to Address Housing Discrimination Faces Lawsuit PLF attorney Andrew Quinio said that if the state offers public benefits, “they must be open to all, regardless of race.”6Pacific Legal Foundation. Federal Lawsuit Aims to End Racial Discrimination in Housing Assistance
The court granted a motion to dismiss on June 24, 2025, but the case did not end there; the parties continued litigating and moved on to a request for a preliminary injunction that would have paused the program during the litigation.8Business Law Today. Reverse Discrimination: Recent Developments and Econometric Approaches
Why the Judge Refused to Halt the Program
In February 2026, U.S. District Judge John H. Chun denied FAIR’s request for a preliminary injunction. He ruled that FAIR had not shown it was likely to win on its Equal Protection claim.9HousingWire. Washington SPCP Court Ruling
The ruling accepted, at least for the preliminary stage, that Washington had a compelling interest in addressing racial homeownership disparities. Judge Chun cited a study commissioned by the Housing Finance Commission that documented the state’s “active and passive” participation in discriminatory practices, including racially restrictive covenants, exclusionary zoning, and government takings of property from communities of color. He described the statistical evidence of ongoing disparities as “stark.”10Pacifica Law Group. Covenant Homeownership Program Injunction Denied
On the question of whether FAIR’s members were being harmed enough to justify pausing the program, Judge Chun noted that “there are many other state-sponsored first-time homebuying programs for which they would be eligible.”10Pacifica Law Group. Covenant Homeownership Program Injunction Denied The injunction ruling did not end the lawsuit. The underlying case remained active as of early 2026, with no trial date publicly reported.11Washington State Standard. Feds Launch Probe Into Washington Program to Redress Housing Discrimination
The HUD Investigation
A month after the injunction was denied, the federal government opened a second front. On March 24, 2026, HUD’s Office of Fair Housing and Equal Opportunity sent the Housing Finance Commission a formal letter announcing an investigation into whether the program violates the Fair Housing Act through “illegal racial and ethnic preferences.”12HUD. HUD News Release 26-023
Assistant Secretary Craig Trainor, who leads that office, said publicly available information about the program “strongly suggests that unlawful discrimination is occurring.” He described it as a “government-sponsored housing experiment” that distributes benefits based on race and ancestry while making residents of European, Japanese, Arab, and Jewish descent ineligible regardless of income. Trainor also argued that because the commission itself had not denied loans based on race before launching the program in 2024, it lacked standing to claim it was remedying its own past discrimination.13Multifamily Dive. HUD Investigates Washington State Homeownership Program
The letter directed the commission to preserve all records connected to the program, including electronic communications and messages on encrypted applications sent from both official and personal devices, and said HUD would issue initial information requests within ten business days. If the investigation finds reasonable cause to believe the Fair Housing Act was violated, HUD can file a formal discrimination complaint or refer the matter to the Department of Justice.14HUD. WSHFC Investigation Letter
HUD Secretary Scott Turner announced the probe with the statement “DEI is dead at HUD,” framing it as part of the Trump administration’s broader move against race-conscious government programs. The Housing Finance Commission said it would respond to the requests for information.15Spokesman-Review. HUD Launches Investigation Into WA’s Covenant Homeownership Program
The Federal Regulatory Backdrop
The program was built on a specific legal foundation: the Equal Credit Opportunity Act of 1976 and its implementing Regulation B, which allow creditors to run “special purpose credit programs” that target economically disadvantaged groups, including groups defined by race.16Office of the Comptroller of the Currency. OCC Bulletin 2022-3: Special Purpose Credit Programs That framework is now being narrowed.
On April 22, 2026, the Consumer Financial Protection Bureau finalized a rule change, effective July 2026, that bars for-profit creditors from using race, color, national origin, or sex as eligibility criteria for special purpose credit programs, and imposes far tougher documentation requirements when other protected characteristics are used. The CFPB cited the Supreme Court’s 2023 decision in Students for Fair Admissions v. Harvard as support for heightened scrutiny of race-based classifications.17Federal Register. CFPB Final Rule Amending Regulation B
That rule targets for-profit lenders, not government-backed programs like Washington’s, so it does not directly restrict the Covenant Homeownership Program. It does signal how the federal position on race-conscious lending has shifted. In May 2026, the National Fair Housing Alliance and 78 civil rights and consumer organizations sued the CFPB to block the changes, calling them a dismantling of 50 years of fair lending protections.18National Fair Housing Alliance. The Trump Administration’s FY27 Budget Places Fair and Affordable Housing Out of Reach Trainor separately warned at a banking industry conference that any special purpose credit program not complying with the Fair Housing Act “continues to be subject to enforcement” and urged institutions with race-based criteria to take “immediate remedial actions.”19ABA Banking Journal. HUD Official Discusses Changes to Fair Housing Act Enforcement
Is the Program Still Running?
Yes. As of mid-2026, the Covenant Homeownership Program continues to accept applications and close loans. The state legislature expanded it in 2025 through House Bill 1696, which raised the income ceiling to 120 percent of area median income and added the five-year forgiveness provision for lower-income borrowers.20Washington State Legislature. 2SHB 1696 House Bill Report Following the February 2026 injunction ruling, Pacifica Law Group, which represents the Housing Finance Commission, reported that the program had assisted more than 1,100 first-time homebuyers since launch.10Pacifica Law Group. Covenant Homeownership Program Injunction Denied
What is not yet resolved is the underlying legal question. The FAIR lawsuit remains pending in federal court, the HUD investigation is ongoing, and the outcome will likely turn on whether courts accept Washington’s argument that it has a compelling interest in remedying its documented history of housing discrimination, or whether the federal government’s position that the program amounts to unlawful racial preferences prevails.