Report alleges discrimination in REO maintenance
Foreclosed homes in minority communities are not kept up as well as those in predominantly white areas, according to a housing group's investigation.
UPDATE, April 10, 2012: The National Fair Housing Alliance filed a complaint with the U.S. Department of Housing and Urban Development against Wells Fargo, alleging discrimination in foreclosure maintenance. The company denied the charge.
Lenders are more likely to maintain foreclosed homes in predominantly white neighborhoods, while allowing those in minority neighborhoods to fall into disrepair, according to a fair-housing organization.
The National Fair Housing Alliance, a nonprofit created to fight housing discrimination, and four of its member organizations looked at the marketing and maintenance of 1,000 foreclosed properties in nine cities: Atlanta; Baltimore; Dallas; Dayton, Ohio; Miami; Oakland, Calif., Philadelphia; Phoenix; and Washington, D.C.
The investigation found that bank-owned properties in minority neighborhoods were 42% percent more likely to have multiple maintenance issues than properties in white neighborhoods. The findings are detailed in a report, "The Banks Are Back, Our Neighborhoods Are Not: Discrimination in the Maintenance and Marketing of REO Properties."
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"This report offers evidence that banks responsible for peddling unsustainable loans to communities of color and triggering our current foreclosure crisis are continuing to damage those communities by failing to properly maintain and market the properties they own," Shanna L. Smith, president and CEO of the housing group, said in a news release.
Smith said the organization planned to file lawsuits, complaints with the federal government or both. The report did not name specific lenders, but it did praise Freddie Mac for its policies, including superior maintenance of homes and the fact that it provided a toll-free number for neighbors to report problems.
The investigation also found that:
- Bank-owned properties in minority communities were 82% more likely to have broken windows.
- Bank-owned properties in predominantly white neighborhoods were 32% more likely to be marketed with proper signs than those in predominantly black neighborhoods and 38% more likely to have proper signs than those in Latino neighborhoods.
- Properties in minority neighborhoods were 34% more likely to have trash and debris on the lots than those in white neighborhoods.
The report said that lenders' poor maintenance of homes in minority neighborhoods had exacerbated the effects of the foreclosure crisis in those communities:
Proper REO maintenance is a key factor in both the marketability and value of a home as well as the sustainability and viability of communities. Poor maintenance practices can result in a property remaining vacant for longer periods of time. Poor maintenance also increases the likelihood that a property will be purchased by an investor at a discounted price, rather than by an owner-occupant, because of the cost to rehabilitate the home. Thus, the inferior way in which banks maintain and market their REO properties in communities of color actually changes the character of and serves to degrade the quality of life in these neighborhoods.
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.