by Nicholas Tovino
A four-year investigation by fair-housing advocates found Fannie Mae systematically fails to maintain foreclosed properties in minority neighborhoods, a practice that “perpetuates racial segregation.”
The National Fair Housing Alliance and 20 other groups brought a federal complaint Monday against the Federal National Mortgage Association, or Fannie Mae, in the Northern District of California.
The fair-housing groups claim that the 68-year-old government-sponsored financer of mortgage loans violates the Fair Housing Act by neglecting foreclosed properties in communities of color.
From July 2011 to October 2015, the alliance investigated 2,300 properties in 38 metropolitan areas, documenting with photos how Fannie Mae maintained its real estate owned, or REO, properties in predominantly white neighborhoods compared to those in communities of color.
The investigation found the average number of deficiencies among properties in minority neighborhoods was 7.2, 50 percent higher than the average 4.8 maintenance lapses found in predominantly white neighborhoods.
The survey also found 24 percent of properties in communities of color had 10 or more maintenance or marketing problems compared to 6 percent in white neighborhoods.
That disparity contributes to lower property values in minority neighborhoods and makes it harder for homeowners in those communities to move to integrated neighborhoods because they have less equity to use to buy a new home, according to the 117-page lawsuit.
“The prospects for integration in the affected neighborhoods are reduced because white buyers are deterred from purchasing homes in neighborhoods with poorly maintained REO properties, leaving the existing segregated racial composition of these neighborhoods unchanged,” the complaint states.
The fair-housing groups looked at more than a dozen factors at the 2,300 properties, including accumulation of trash and mail, overgrown grass and shrubs, unsecured doors, damaged steps and handrails, windows and fences, and broken or missing signage.
“Fannie Mae is required, under the Fair Housing Act, to maintain all REO properties, regardless of their location, without regard to race, color, religion, sex, handicap, familial status, or national origin,” the complaint states.
The investigation found 39 percent of properties in minority neighborhoods had trash visible on the property compared to 14.9 percent in predominantly white neighborhoods. It found 41 percent of foreclosed homes in communities of color had damaged, boarded-up or unsecured windows, compared to 19.1 percent in white neighborhoods.
“Fannie Mae’s behavior is the type of ‘covert and illicit stereotyping’ that stigmatizes communities of color as less desirable than predominantly white neighborhoods,” the groups say.
After completing their investigation, the fair housing groups met repeatedly with Fannie Mae officials to address the company’s discriminatory maintenance practices, but no action was taken, according to the complaint.
On May 13, 2015, the groups filed a complaint against Fannie Mae with the Department of Housing and Urban Development. That complaint is still under investigation and remains pending.
“Despite plaintiffs’ notices and efforts to obtain Fannie Mae’s voluntary compliance with the Fair Housing Act, Fannie Mae did not change its behavior and continued to maintain its REO properties differently based on the predominant race or national origin of neighborhoods,” the complaint states.
The fair-housing groups say they have standing to sue Fannie Mae under the Fair Housing Act because the “discriminatory behavior” has driven resources away from them and forced them to delay, suspend and forgo programs to combat the mortgage financer’s unfair conduct.
The Supreme Court this year agreed to hear an appeal on whether Miami has standing to sue Wells Fargo, Bank of America and CitiGroup for targeting minorities with predatory loans under the Fair Housing Act, though the city was not directly injured by the alleged conduct.
The fair housing advocates say they fall squarely within the “zone of interests” protected by the Fair Housing Act because Fannie Mae’s conduct has “frustrated” their missions of increasing fair and equal access to housing for all and eliminating racial segregation, impeded their community investment programs and required them to divert scare resources.
They seek punitive damages and an injunction barring Fannie Mae from violating the Fair Housing Act by not maintaining foreclosed properties in communities of color.
They are represented by Glenn Schlactus with Relman, Dane and Colfax in Washington, D.C.
Fannie Mae spokesman Pete Bakel did not immediately respond to an email seeking comment Tuesday.
The National Fair Housing Alliance is joined by nearly two dozen co-plaintiffs Fair Housing Advocates of Northern California; Central Ohio Fair Housing Association; Connecticut Fair Housing Center; Denver Metro Fair Housing Center; Fair Housing Center Of Central Indiana; Fair Housing Center Of Greater Palm Beaches; Fair Housing Center Of West Michigan; Fair Housing Continuum Inc.; Greater New Orleans Fair Housing Action Center; Hope Fair Housing Center; Housing Opportunities Made Equal Of Virginia; Housing Opportunities Project For Excellence Inc.; Housing Research & Advocacy Center; Miami Valley Fair Housing Center; Metro Fair Housing Services; Metropolitan Milwaukee Fair Housing Council; North Texas Fair Housing Center; Open Communities Inc.; South Suburban Housing Center; and the Toledo Fair Housing Center.