You are asking if the Housing Authority can refuse to contract with you. Yes they can.

There is likely a Lis pendense on file with the county.

“Lis pendens” is latin for “suit pending.” The notice of lis pendens is recorded in the county land records and then a copy is served to the borrower, along with the complaint and summons. The purpose of the notice of lis pendens is to inform the public that a lawsuit involving the property is pending. The notice of lis pendens is typically a one- or two-page document that includes the legal description of the property and states that a foreclosure has been initiated.
There is no discrimination. The action you can take is to pay up on the mortgage.