MVFHC and partner agencies uncover discrimination in treatment of foreclosed properties

Investigation finds striking incidents of discrimination in care and maintenance of bank-owned properties

Download the report (PDF format)

April 4, 2012 — The Miami Valley Fair Housing Center (MVFHC) and its partners, the National Fair Housing Alliance (NFHA) and three other NFHA member agencies, announced the results of an undercover investigation into the ways the nation’s financial institutions are failing to maintain Real Estate Owned (REO) properties in African-American and Latino neighborhoods. The investigation of REO properties in nine major U.S. cities, including Dayton, 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,” details the results of the evaluation of more than 1,000 REO properties located in the greater Dayton area as well as in and around Atlanta, GA; Baltimore, MD; Dallas, TX; Miami and Fort Lauderdale, FL; Oakland/Richmond/Concord, CA; Philadelphia, PA; Phoenix, AZ; and Washington, DC.

“This report offers evidence that banks responsible for peddlign 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, NFHA’s President and CEO.

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

MVFHC, NFHA and three other NFHA member agencies—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, lack of “for sale” signs, trash on the properties, 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 those 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 those in African-American neighborhoods and 38 percent more likely than those 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,” Smith said. “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 on 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.

Download the report (PDF format).