Feds Launch Probe Into Washington State's Race-Based Home Loan Program

The Trump administration is investigating the state's Covenant Homeownership Program that offers no-interest loans to help address historical housing discrimination.

Mar. 26, 2026 at 6:39pm

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The U.S. Department of Housing and Urban Development announced it is investigating Washington state's Covenant Homeownership Program, which offers no-interest home loans to residents harmed by historical housing discrimination. The program, created by the state legislature in 2023, provides loans of up to 20% of a home's cost to help with down payments and closing expenses for first-time homebuyers who are Black, Hispanic, Native American, Alaska Native, Native Hawaiian, Pacific Islander, Korean or Indian. The feds claim the program's race-based eligibility requirements violate the federal Fair Housing Act.

Why it matters

The investigation marks the latest clash between the Trump administration and Democrat-led states over diversity, equity and inclusion efforts. The Covenant program was created to address generations of racial housing discrimination, including through restrictive covenants and redlining, that have resulted in persistent homeownership gaps. However, the feds argue the program's race-based eligibility amounts to illegal discrimination.

The details

The Covenant Homeownership Program was launched in 2024 and is funded through a $100 document recording assessment on real estate transactions. It has already served over 500 households and delivered more than $60 million in down payment loans, with most recipients being Black. The program was expanded in 2025 to raise the income limit from 100% to 120% of area median income. The feds claim the program's exclusion of people of European, Arab and Jewish descent violates the Fair Housing Act.

  • The Covenant Homeownership Program was created by the Washington state legislature in 2023.
  • The program was launched in 2024.
  • In 2025, lawmakers expanded the program by raising the income limit from 100% to 120% of area median income.
  • From July 2024 to June 2025, the program served over 500 households and delivered more than $60 million in down payment loans.

The players

Washington State Housing Finance Commission

The state agency that runs the Covenant Homeownership Program.

U.S. Department of Housing and Urban Development

The federal agency that announced it is investigating the Covenant Homeownership Program.

Scott Turner

Secretary of the U.S. Department of Housing and Urban Development, who said "DEI is dead at HUD" and that the Trump administration "will not tolerate" illegal racial discrimination.

Bob Ferguson

The Democratic governor of Washington, who said the state is "thoughtful" in its response to federal investigations.

Craig Trainor

Assistant secretary for fair housing and equal opportunity at the U.S. Department of Housing and Urban Development, who wrote that the Covenant program "strongly suggests that unlawful discrimination is occurring and, therefore, warrants investigation."

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What they’re saying

“DEI is dead at HUD. I will not stand for illegal racial and ethnic preferences that deny Americans their right to equal protection under the law. HUD will work to ensure Washington state follows the law and provides equal opportunity for all citizens seeking assistance under the Commission's programs.”

— Scott Turner, Secretary, U.S. Department of Housing and Urban Development

“Federal government investigates a lot these days, and we'll treat it the same as we do everything with the federal government. We'd be thoughtful about our response.”

— Bob Ferguson, Governor, Washington

“Illegal discrimination on the basis of race is morally reprehensible, socially perverse, and destructive of America's pluralistic polity. The Trump Administration will not tolerate it. Not now. Not ever.”

— Craig Trainor, Assistant Secretary for Fair Housing and Equal Opportunity, U.S. Department of Housing and Urban Development

What’s next

After the investigation, the Department of Housing and Urban Development could file a discrimination complaint against the Washington State Housing Finance Commission or refer the case to the Justice Department.

The takeaway

This investigation highlights the ongoing tensions between the Trump administration's opposition to race-based policies and efforts by Democratic-led states to address historical housing discrimination and racial inequities in homeownership. The outcome could have significant implications for similar programs in other states.