The National Fair Housing Alliance (NFHA) issued a report, The Banks are Back—Our Neighborhoods are Not: Discrimination in the Maintenance and Marketing of REO Properties, on April 4. The report summarizes an investigation conducted by NFHA of more than 1,000 real estate-owned (REO) properties in nine metropolitan areas.
Banks are increasingly in the position of having to act as landlords and property managers as their REO portfolios grow due to foreclosure. Some regulators, such as the Office of the Comptroller of Currency, have begun to provide guidance to banks on how they should manage their REO stock (see Memo, 12/16/2011). However, according to the report’s findings, NFHA’s investigation “revealed a pattern of consistently poorer maintenance in communities of color than in white communities.”
In response to the findings in the report, on April 10, NFHA and four of its member organizations filed a discrimination complaint with HUD against Wells Fargo & Co. and Wells Fargo Bank, N.A. “The investigation of 218 foreclosed properties owned by Wells Fargo demonstrates that Wells Fargo has engaged in a systemic practice of maintaining and marketing its foreclosed, bank-owned properties (also known as Real Estate Owned or REO) in a state of disrepair in communities of color while maintaining and marketing REO properties in predominantly white communities in a far superior manner,” says NFHA in a press release. HUD will now initiative an investigation of the claims made against Wells Fargo and will also begin a conciliation process between the involved parties.
The under maintenance and management of foreclosed properties is of concern to many advocates, particularly in light of recently announced Federal Housing Finance Agency (FHFA) REO-to-rental pilot program (see Memo, 3/2). In comments submitted to a Request for Information (RFI) prior to the development of the program, NLIHC said that “past efforts to dispose of REO properties (held by FHA) have not been as successful as they could have been because there was no associated funding provided to assist with operating or rehabilitation expenses.” NLIHC recommended that REO sales be paired with National Housing Trust Fund dollars to assure that the sold REO properties are decent and affordable to extremely low income people (see Memo, 9/16/11). NLIHC also strongly recommended that mission-driven purchasers rooted in communities be given access to the properties.
Click here to view the report.
Click here to view NLIHC’s comments in response to the RFI.