Discrimination by Banks in Treatment of Foreclosed Properties Uncovered

WASHINGTON – Today, the National Fair Housing Alliance (NFHA)and four of its local member organizations announced the results of an undercover investigation into the ways the nation’s financial institutions are failing to maintain and market Real Estate Owned (REO) properties in African-American and Latino neighborhoods.  The investigation of REO properties in nine major U.S. cities found striking incidents of discrimination in the care and maintenance of properties, with foreclosed properties in White areas being much better maintained and marketed than those in neighborhoods of color.

A report of the investigation, “The Banks Are Back, Our Neighborhoods Are Not: Discrimination in the Maintenance and Marketing of REO Properties,” was released today.  It details the results of the evaluation of more than 1,000 REO properties located in and around Atlanta, GA; Baltimore, MD; Dallas, TX; Dayton, OH; Miami/Fort Lauderdale, FL; Oakland/Richmond/Concord, CA; Philadelphia, PA; Phoenix, AZ; and Washington, DC.

“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,” said Shanna L. Smith, President and CEO of the National Fair Housing Alliance.

“This is an investigation – not a study –- that will culminate in the filing of administrative complaints with HUD and/or lawsuits in federal district court,” continued Smith.  “The first complaint will be filed shortly.”

The National Fair Housing Alliance in Washington, D.C., and four of its member organizations – the Miami Valley Fair Housing Center in Dayton, OH; Housing Opportunities Project for Excellence in Miami, FL; Metro Fair Housing Services in Atlanta, GA; and North Texas Fair Housing Center in Dallas, TX – evaluated the maintenance and marketing of REO properties on a 100-point scale, subtracting points for broken windows and doors, water damage, overgrown lawns, no “for sale” sign, trash on the property, and other deficits.

The evaluations took into account 39 different aspects of the maintenance and marketing of each property.  Overall, REO properties in communities of color were 42 percent more likely to have more than 15 maintenance problems than properties in White neighborhoods.

Some trends the investigation revealed include:

  • REO properties in communities of color were 82 percent more likely than REO properties in White communities to have broken or boarded windows;
  • REO properties in White neighborhoods were 32 percent more likely to be marketed with the proper signage than African-American neighborhoods and 38 percent more likely than in Latino neighborhoods; and
  • Newer homes generally scored higher than older homes, but racial and ethnic disparities persisted with non-structural factors such as curb appeal and signage.

“We hope that banks will heed the information in this report and take immediate action to correct the disparate treatment we have found,” continued Smith.  “The proper maintenance and marketing of REO properties is a key factor in the sale of homes to families rather than to investors.”  The report contains details specific to each city and gives extensive recommendations on how to fix these problems.

The Fair Housing Act makes it illegal to discriminate based on race, color, national origin, religion, sex, disability or familial status, as well as the race or national origin of residents of a neighborhood.  This law applies to housing and housing-related activities, which include the maintenance, appraisal, listing, marketing and selling of homes.

To read the full report, please go to www.nationalfairhousing.org.