National Fair Housing Alliance Complaint Against Bank’s Discriminatory Housing Practices

Posted by By Publisher at 19 abril, at 20 : 59 PM Print

J. Smith-El Hispano

Philadelphia- “It’s a shame that a lot of these banks aren’t taking care of these properties,”  Edwin Gonzalez of Facelift Remodelers and a Philadelphia contractor told El Hispano in a recent interview.

“I’m here in the Olney section today,” said Mr. Gonzalez, “and I can see a vacant property where the brick work is sound, but there are no windows.”

“There are so many houses in terrible condition. And I’m sure the banks don’t want to put money in these houses,” added Mr. Gonzalez. ‘But they’re not going to sit there. People break into them, like drug dealers.”

Since 2007, the meltdown in the nation’s housing market has caused more than 4 million Americans to lose their homes, and another 3 million more families to become delinquent on their mortgages, with the prospect of  foreclosure hanging over them.

Based on the findings of undercover investigations of 218 foreclosed  properties -in nine cities- owned by Wells Fargo Bank, N.A., the National Fair Housing Alliance (NFHA) and four of its member organizations,  announced last week the filing of a complaint with the U.S. Department of Housing and Urban Development. The NFHA accused the San Francisco-based bank of engaging in a “systemic practice of maintaining and marketing its foreclosed, bank-owned properties (REOs) in predominantly White communities in a far superior manner.”

In investigating the practices of Wells Fargo Bank, the NFHA evaluated  REO properties in eight metropolitan areas, including Philadelphia, Atlanta, Washington, D.C., Baltimore, Dallas, Dayton,Ohio, Oakland, California and Miami, Florida.

In addition, the investigation took into account 39 different factors relating to maintenance and marketing of each property, ranging from signage and curb appeal, to the condition of paint, siding and gutters, uncut grass, water damage, and broken windows and doors.

Characterizing the disparities in maintenance and marketing of REO homes in Latino and African-American neighborhoods as “extremely troubling,” the NFHA investigation revealed that, “REO homes in White neighborhoods were more likely to have neatly manicured lawns, securely locked doors, and attractive “For Sale” signs out front.”
Meanwhile, “homes in communities of color were more likely to have overgrown yards littered with trash, unsecured doors, broken windows and indications of marketing as a distressed sale.” It goes on to state that REOs in communities of color generally “appeared vacant, abandoned, blighted and unappealing to real estate agents who might market the unit to homebuyers.”

The NFHA bolstered the findings of differences in treatment of  Real Estate Owned properties with specific data. The REOs in communities of color, for example, were 42 percent more likely to have more than 15 maintenance problems than similar properties in white communities.  Trash and debris were 34 percent more likely to be found on REO properties located in communities of color; similarly, REOs in Latino and African-American neighborhoods were 82 percent more likely to have broken or boarded up windows.

Looking at the marketing perspective, the REO properties in the majority populations were 33 percent more likely to be marketed with a professional “For Sale” sign, than their counterparts in the African-American or Latino communities.

In gauging the breadth of an ongoing housing crisis that has disproportionately impacted the Latino and African-American communities, a comprehensive report from the National Fair Housing Alliance (NFHA) entitled, “Banks are Back, Our Neighborhoods Are Not,” examined practices by a number of lending institutions and predicted, “we are not even half way through the foreclosure crisis.”

As up to a million of these foreclosed properties, or Real Estate Owned (REO) properties, have begun resurfacing in affluent, middle-class and lower-income neighborhoods, the NFHA contends they present a “huge obstacle for recovery’ for municipalities like Philadelphia, Camden and Reading, PA, in which the REOs are located.  The negative impact of these REOs range from decreased market values of properties adjacent to foreclosed homes, depleted tax base and neighborhood blight; all issues that have had a particularly devastating impact on Latino communities.

The subprime loans and predatory lending practices which fostered the housing market collapse, according to the NFHA study, was concentrated in communities of color; resulting in foreclosures in these “neighborhoods (that) have occurred at a faster rate.”

The foreclosure and delinquency rates for Latino households of 25 percent, is only surpassed by those of the Great Depression. While the majority of the U.S. population experienced difficulties – at 12 percent- it was half the severity  of that experienced by Latinos.

Looking at the housing crisis from the perspective of communities of color, the Nation Fair Housing Alliance argued that, “the ever-increasing number of REO properties and how well they are maintained and marketed presents itself as an extremely critical civil rights and fair housing issue.”  Whether an REO property is properly maintained or marketed, according to the NFHA, “is essential to bolstering property values, stabilizing neighborhoods, and stopping the decline in the nation’s homeownership rate.”

The “spillover effects on neighboring properties,” due to the negligent treatment of REOs by lenders, the NFHA report continued, is an increasingly important “civil rights issue” as foreclosures continue to be concentrated in Latino, African-American and immigrant neighborhoods.

In the effort to satisfy the dream of homeownership, Latino borrowers were often lured into taking burdensome subprime mortgages, leaving them more susceptible to becoming delinquent and defaulting on  loans. The Center for Responsible Lending (CRL) reported that, of mortgages originated  between 2004 and 2008, Latinos and African-American borrowers were nearly twice as likely to have one or more ’high risk’ features or conditions in their loans.

Among these features: a prepayment penalty, Option Adjustable Rate Mortgages (ARMs), or higher interest rates.

The disparate impact of the foreclosure crisis on the Latino community was further underscored by a recent study by the Pew Research Centers – which found that between 2005 and 2009- Latino families lost a staggering 66 percent of their household wealth; African-Americans similarly lost 53 percent of their household wealth; while the rest of the population experienced a 16 percent drop in household wealth. From 2009 to 2012, Latinos are expected to lose $177 billion in housing equity.

In its evaluation of  Philadelphia‘s REOs, the NFHA documented “more than ten distinct maintenance or marketing problems”  in 41 percent of the homes in minority communities. “Proper REO maintenance is a key factor in both the marketability and value of a home as well as the sustainability and violability of communities,” argues the NFHA.

“The inferior way in which banks maintain and market their REO properties in communities of color,” concluded the NFHA study, “actually changes the character of and serves to degrade the quality of life in these neighborhoods.”

Wells Fargo Responds A  spokesman for Wells Fargo, in response to an El Hispano query, rejected the complaint’s characterization: “Wells Fargo conducts all lending-related activities in a fair and consistent manner without regard to race, and this includes maintenance and marketing standards for all foreclosed properties for which we are responsible.”

“Regrettably, the complaint does not include specific property information that can allow us to investigate the circumstances in any of the markets they list.  Wells Fargo takes responsibility  for managing property preservation for homes with loans that are within our portfolio.”

Next week, NFHA will announce another complaint that it will file against another major bank.

PHOTO:  Wells Fargo Bank was named in a complaint by the National Fair Housing Alliance (NFHA) as  maintaining and marketing homes in predominantly white areas in a “far superior manner” to those in Latino areas.  Wells Fargo, in a lengthy reply to El Hispano, denied the complaint which they said was not “specific.”

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