I am not sure I understand the way Fair Housing Act is enforced. Facebook allows ads targeting. This is how it earns money. Apparently some people decided that they want to advertise houses to white Christians population, which is illegal in the USA - shouldn't be HUD after those who configured such criteria, not Facebook? Facebook provided only a tool. Nobody is after hardware store because a hammer bought there was…
Indeed they should. This is basically like going after the phone company because somebody else was using number prefixes as a proxy for race. Even though this is a fundamental property of any system that doesn't explicitly preclude such targeting, Facebook already took steps to limit this type of discrimination in ads for housing or credit. That was good enough for the ACLU, Fair Housing Alliance, and others who have a sincere interest in the matter. It should have been good enough for HUD too, which brings us to the real crux of the matter.
Sufficiency of the new limits on targeting was not the sticking point between Facebook and HUD. The sticking point was HUD's demand for all user data, without any safeguards. It's a fishing expedition. What would HUD do with that data? It's not a stretch to believe they'd use it to further this administration's own discriminatory agenda. HUD is not fighting against discrimination at all. They're on the other side of that battle. Rejecting their demand was IMO the right thing to do.