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Mortgage Giant Fannie Mae Accused of Racial Discrimination in New Orleans, Baton Rouge and 36 U.S. Metro Areas

Posted on 05. Dec, 2016 by

National Fair Housing Alliance, Greater New Orleans Fair Housing Action Center File Federal Lawsuit Over Neglected Foreclosures

WASHINGTON, D.C. and New Orleans, LA — Today, the National Fair Housing Alliance (NFHA), the Greater New Orleans Fair Housing Action Center (GNOFHAC) and 20 local fair housing organizations from across the United States filed a housing discrimination lawsuit against Fannie Mae in federal district court in San Francisco, California.  The lawsuit alleges that Fannie Mae purposely fails to maintain its foreclosures (also known as real estate owned or “REO” properties) in African American and Latino neighborhoods to the same level of quality it does for foreclosures it owns in white neighborhoods.  The data supporting the federal lawsuit, which includes substantial photographic evidence, shows a stark pattern of discriminatory conduct by Fannie Mae in the maintenance of its foreclosures.

The lawsuit is the result of a multi-year investigation.  During the past several years, NFHA notified Fannie Mae many times of its failure to maintain and market its foreclosed homes in communities of color to the same standard to which it was maintaining and marketing the foreclosed homes it owned in similar, predominantly white neighborhoods.  In spite of numerous meetings between NFHA and Fannie Mae to address these disparities Fannie Mae persisted in its willful neglect of its properties in African American and Latino communities.

Comprised of evidence from 2011 through 2015, the lawsuit details allegations involving more than 2,300 foreclosed properties owned and maintained by Fannie Mae.  NFHA and 20 partner fair housing organizations collected evidence at each property, noting over 35 data points important to protecting, securing, and marketing the homes.  Investigators also took and reviewed over 49,000 photographs of these foreclosures that document the differences in treatment.  

According to Fannie Mae’s website, “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.  She continued, “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.’”

Fannie Mae-owned properties in predominantly white working- and middle-class neighborhoods are far more likely to have the lawns mowed and edged regularly, invasive weeds and vines cleared, windows and doors secured or repaired, litter and trash removed, leaves raked, and graffiti erased from the property.  Conversely, Fannie Mae-owned properties in predominantly African American and Latino working- and middle-class neighborhoods are more likely to be left neglected.  The windows and doors are often unsecured, left wide open, or boarded.  The poor appearance of the Fannie Mae-owned properties in middle- and working-class neighborhoods of color destroys the homes’ curb appeal for prospective homebuyers and invites vandalism because the homes appear to be abandoned.  Additionally, the blight created by Fannie Mae results in a decline in home value for the predominantly African American and Latino families who live nearby, deepening the racial wealth gap and inequality in America.  

Poorly-maintained foreclosures also have serious health consequences.  According to a report by Mariana Arcaya, Sc.D., M.C.P for the American Heart Association, living near a foreclosure can increase a person’s blood pressure “due in part to unhealthy stress from residents’ perception that their own properties are less valuable, their streets less attractive or safe and their neighborhoods less stable.”  Arcaya told TechTimes.com that “people may not find walking past an empty house appealing and this affects the physical activities that they engage in such as running and walking around the neighborhood.”

According to PestWorld.org, poorly-maintained foreclosures can attract a variety of pests.  An overgrown or unkempt yard, for example, can harbor many more pests than a well-groomed yard.  Small holes in siding, rips in screens, broken windows, and cracks in the foundation provide easy access for pests.  Further, a rodent infestation in a foreclosed property may likely to spread to nearby homes, posing serious health, safety, and property risks.  A number of Fannie Mae’s foreclosed properties were infested with rats upon inspection.

Smith stated, “Fannie Mae continued to neglect its foreclosures in middle- and working-class communities of color, even after we provided them with photographic evidence from 2009 through 2011.  The evidence shared with Fannie Mae demonstrated differing maintenance and marketing practices between similar foreclosures in white neighborhoods and those in African American and Latino neighborhoods in Washington, DC; Prince George’s County and Montgomery County, MD; and the metropolitan areas of Atlanta, Oakland, Philadelphia, Dayton, Baltimore, Dallas, and Phoenix.  Fannie Mae’s intentional failure to correct its discriminatory treatment in African American and Latino neighborhoods—the same communities hardest hit by the foreclosure crisis—can only be seen as institutional racism.  This systematic and intentional neglect of foreclosed homes in communities of color devalues not only the property but the very lives of the families living in these neighborhoods.  Fannie Mae also creates blight that contributes to health and safety hazards for families living near Fannie Mae’s poorly-maintained homes.”

“If Fannie Mae can adequately maintain real estate in white communities of Baton Rouge and New Orleans, it is only fair that homes in African American communities in those cities are maintained just as well,” said Cashauna Hill, Executive Director of the Greater New Orleans Fair Housing Action Center. “Fannie Mae’s failure to maintain foreclosed properties in African American communities in New Orleans and Baton Rouge has contributed to, rather than mitigated, the losses experienced during the foreclosure crisis and has disproportionately harmed people of color.”

Summary of Findings:

  • 52.8 percent of the Fannie Mae foreclosures in white neighborhoods had fewer than 5 deficiencies, while only 23.6 percent of the Fannie Mae foreclosures in neighborhoods of color had fewer than 5 deficiencies.
  • 23.8 percent of the Fannie Mae foreclosures in neighborhoods of color had 10 or more deficiencies, while only 6.5 percent of the REO properties in predominantly white neighborhoods had 10 or more deficiencies.  
  • In both New Orleans and Baton Rouge, the investigation showed significant differences in how properties in African American neighborhoods were treated compared to those in white neighborhoods.
    • In metro New Orleans, Fannie Mae REO properties in African American neighborhoods were twice as likely to have 10 or more maintenance deficiencies or problems than REO properties in white neighborhoods (35% vs. 18%).
    • In Baton Rouge, nearly half (45%) of Fannie Mae REO properties in African American neighborhoods had 10 or more maintenance deficiencies or problems, while zero properties in white neighborhoods had 10 or more problems.

The National Fair Housing Alliance

Founded in 1988, the National Fair Housing Alliance is a consortium of more than 220 private, nonprofit fair housing organizations, state and local civil rights agencies, and individuals from throughout the United States.  Headquartered in Washington, D.C., the National Fair Housing Alliance, through comprehensive education, advocacy, and enforcement programs, provides equal access to apartments, houses, mortgage loans, and insurance policies for all residents in the nation.

The work that provided the basis for this investigation was supported in part by funding under grants from the U.S. Department of Housing and Urban Development.  The substance and findings of the work are dedicated to the public. The author and publisher are solely responsible for the accuracy of the statements and interpretations contained in this release.  Such interpretations do not necessarily reflect the views of the Federal Government.

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