New Housing Lawsuit Alleges Discrimination in 38 U.S. Metros – Next City

New Housing Lawsuit Alleges Discrimination in 38 U.S. Metros

A poorly maintained Fannie Mae foreclosure in Oakland (Credit: Fair Housing Advocates of Northern California)

Twenty organizations across the country filed a housing discrimination lawsuit against Fannie Mae Monday, alleging that the mortgage giant consistently maintains and markets foreclosures in predominantly white neighborhoods better than in predominately Latino and black neighborhoods. Backed up by a multiyear investigation and photographic comparisons of Fannie Mae-owned properties, the suit aims to demonstrate “a stark pattern of discriminatory conduct.”

“There is no good, non-discriminatory reason why Fannie Mae should market and maintain their foreclosed properties in communities of color differently from those in white communities,” said Caroline Peattie, executive director of Fair Housing Advocates of Northern California, one of the organizations involved in the suit, in a statement. “This is one more step in the pattern that we’ve seen where lenders divest communities of color of equity — first, by denying loans to people of color, then targeting them for unaffordable loans, then foreclosing on them, and finally failing to maintain and market those homes. The foreclosure crisis disproportionately affected non-white communities, and Fannie Mae’s failure to maintain and market those foreclosed homes harms these communities further.”

The National Fair Housing Alliance (NFHA) and other local organizations in the Bay Area began their investigation in 2009. When Fannie Mae failed to respond to alleged evidence of discriminatory patterns, the investigation expanded to 18 additional fair housing organizations, which eventually collected data from 212 cities in 38 metro areas. The lawsuit contains evidence from more than 2,300 foreclosures owned and maintained by Fannie Mae.

The 38 U.S. metros listed in the complaint and the local fair housing organizations that partnered in the complaint (Credit: National Fair Housing Alliance)

In the Richmond and Oakland, California, metro area, for example, the Fair Housing Advocates of Northern California and NFHA documented 88 Fannie Mae-owned properties. They found that 35 percent of the properties in communities of color had trash or debris on their premises, while only 21 percent in white communities did; 32 percent of houses in communities of color had a broken, boarded or unsecured window, while only 14 percent in white communities did. None of the properties in white communities had a hole in the structure of the house, but 34 percent of properties in communities of color did.

Slides from the Fair Housing Advocates of Northern California's report on Richmond, Oakland and Vallejo, California

The pattern holds nationwide. Overall, of the properties studied, 52.8 percent of Fannie Mae foreclosures in white neighborhoods had fewer than five property deficiencies, while only 23.6 percent in communities of color did. And 23.8 percent of the foreclosures in neighborhoods of color had 10 or more deficiencies. Only 6.5 percent of houses in white neighborhoods had that level of disrepair.

Fair housing organizations working in Hartford, Atlanta, Denver, Orlando, Indianapolis, Chicago, Dayton and others are also parties to the lawsuit. (Presentations on alleged patterns of discrimination in each city can be seen here.) They allege that Fannie Mae’s neglect is not only discriminatory, but contributes to the ongoing structural inequality between white Americans and Americans of color. Since blight decreases the value of nearby properties, neglecting vacant houses in communities of color contributes to the racial wealth gap. Foreclosures harbor mold and rodents, and just their presence can lead to unhealthy stress for nearby residents who may feel their neighborhood is unsafe or unstable.

Fannie Mae’s website reads, “the mission of the Fannie Mae Property Maintenance team is to ensure the quality of our REO property maintenance services, consistently producing best-in-class, market-ready properties and maintaining them until removal from our inventory.”

“Fannie Mae’s mission statement contradicts the findings of the multi-city, multi-year investigation,” said Shanna L. Smith, president and CEO of NFHA, in a statement. “Fannie Mae executes its mission in predominantly white neighborhoods, but certainly the evidence in the complaint and the photographs illustrates that its foreclosures in middle- and working-class neighborhoods of color are not maintained as ‘best-in-class’ and they are not even close to ‘market-ready.’”

Editor’s Note: A Fannie Mae representative emailed Next City with the following statement: “We have heard NFHA’s concerns, and strongly disagree with these allegations. Our REO maintenance standards are designed to ensure that all properties are tended to and treated equally. In addition, over the years we have continuously enhanced our REO maintenance practices in the ordinary course of business, including the use of clear boarding nationally, adoption of technology to enhance the property inspection process, enhanced guidance to field service vendors of our expectations, and enhanced staffing in the field. Through these actions we have demonstrated our continued dedication to providing quality care to all communities. And we remain firmly committed to continuing to provide such attention to our REO properties moving forward.”

Jen Kinney is a freelance writer and documentary photographer. Her work has also appeared in Satellite Magazine, High Country News online, and the Anchorage Press. See her work at jakinney.com.

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