N.O. group joins in a discrimination suit against Fannie Mae

12th December 2016   ·   0 Comments

By Susan Buchanan
Contributing Writer

Fannie Mae’s foreclosed homes can be a bargain, and you might have considered buying one. But in enclaves of middle- and working-class African Americans and Latinos, these dwellings don’t have nearly the curb appeal that they do in comparable white neighborhoods. At least that’s according to a suit filed on Dec. 5 in federal district court in San Francisco by the National Fair Housing Alliance and 20 advocacy groups across the country. The Greater New Orleans Fair Housing Action Center is a plaintiff in the litigation.

The suit alleges that Fannie Mae, or Federal National Mortgage Association, purposely fails to maintain its foreclosed dwellings—known as real-estate owned or REO properties—in non-white areas to the same extent that it does in white quarters. Fannie’s homes in working- and middle-class white neighborhoods are more likely to have lawns mowed and leaves raked; no weeds, vines, litter or graffiti; and secure windows and doors, the suit says.

The city of New Orleans is studying these complaints to see if any action is needed. But some local realtors question whether the state of FNMA’s foreclosed homes is influenced by race, saying Fannie’s decisions about its inventories are business driven. And one of the city’s brokers said REOs in minority neighborhoods have begun to look better lately.

Washington, D.C.-based Fannie Mae is a government-sponsored enterprise and a publicly traded company. Its shares trade over the counter now, after they were delisted by the New York Stock Exchange in 2010. During the nation’s mortgage crisis, Fannie Mae was saved from collapse by a federal bailout in late 2008. Since then, it has managed to turn a profit and has repaid the government for its help.

As for the lawsuit, the National Fair Housing Alliance and 20 other fair-housing groups examined more than 2,300 foreclosed FNMA homes in 38 metro areas. Data were collected on those dwellings from 2011 to 2015 for more than three dozen factors related to home protection and marketing. Investigators took over 49,000 photographs. Prior to that, NFHA and two housing groups has conducted a similar study in four metropolitan areas in 2009.

The findings of NFHAs multi-city investigation belie Fannie Mae’s own mission statement, Shanna Smith, president and CEO of NFHA, said last week. According to Fannie Mae, the mission of its maintenance team is to consistently produce best-in-class, market-ready properties and to maintain them until they’re sold. “Fannie Mae executes its mission in predominantly white neighborhoods,” Smith said. “But the evidence and photographs in our complaint illustrate that its foreclosures in middle- and working-class neighborhoods of color aren’t maintained as best-in-class.”

Smith also said many REOs in minority areas are far from being market-ready. Foreclosed properties that are ignored for long spans fall into disrepair and become targets for vagrants, thieves and animals, according to NFHA.

Last week, the Greater New Orleans Fair Housing Action Center cited problems it found in the city’s non-white neighborhoods. Examiners saw broken doors and windows, litter, overgrown or dead lawns, and live and dead animals. Three-quarters of FNMA foreclosed homes in the city’s African-American and Latino neighborhoods had visible trash outside, and half had overgrown or dead shrubbery. That was in contrast with white neighborhoods, where 12 percent of FNMA properties contained trash and 18 percent had overgrown or dead vegetation. Across the metro area, 35 percent of Fannie’s homes in African-American and Latino sections had ten or more maintenance problems, versus 18 percent in white neighborhoods.

In Baton Rouge, 45 percent of Fannie Mae’s REO properties in working- and middle-class African-American and Latino areas had ten or more maintenance deficiencies, GNOFHAC found. None of the properties examined in the capitol’s white neighborhoods had ten or more problems.

All homes examined in the studies were in working-class and middle-income, not low-income, areas, GNOFHAC spokeswoman Monika Gerhart said last week. “Poorly maintained, REO homes depress these neighbors’ property values, pose health and safety risks, and increase costs for local government,” she said. “Leaving foreclosed properties to rot in African-American neighborhoods is a modern version of redlining.”

Redlining dates to the 1930s, when the federally sponsored Home Owners’ Loan Corporation rated neighborhoods. Areas with minority residents, marked in red on maps of New Orleans and other cities, were considered high-risk for mortgage lenders. An aim of the Fair Housing Act of 1968 was to end that practice.

Ellen Lee, the city’s director of Housing Policy and Community Development, last week said claims about discrepancies in Fannie Mae’s REOs were brought to the city’s attention by the NFHA and the GNOFHAC. Her department is studying them. “We’re already committed to working with banks and housing advocates to resolve any relevant problems, if we find them,” she said. “The city enforces its building codes, regardless of neighborhoods or owners,” she said. “If we need to demolish a home, mow a lawn, or put a lien on, those are all costs to the city. “

Last week, New Orleans-area brokers from various ethnic backgrounds differed in their views about FNMA foreclosed homes. Sean Despenza of Crescent City Living in New Orleans said it was absolutely true that FNMA foreclosures in African American communities are more likely to need repairs and to be surrounded by high grass than those in white areas. He noted that the greatest number of the region’s REOs are in New Orleans East and on the city’s west bank.

Self-employed realtor Barbara Johnson, however, said color discrepancies have dimmed. “FNMA has cleaned up its act in the last couple of years, at least with respect to the outsides of homes in minority communities,” she said. “Fannie’s homes for sale in these neighborhoods look better now.” But in non-white areas, the insides of REO homes sometimes need more work than those in white neighborhoods, so buyers must be extra cautious, she said. First-time home buyers—eligible for low interest-rate mortgages—may need to consider purchase-and-repair mortgages to address HVAC and other internal problems.

The fair housing centers’ study focused on the outsides of homes and their yards, but FNMA also makes internal repairs to increase a building’s appeal to buyers.

Two local realtors said FNMA is bottom-line oriented and motivated to fix up homes to prevent inventory builds. “If the outside needs to be repaired to sell, the house will be repaired, regardless of the neighborhood,” said John Kendall of Face to Face Realty in New Orleans. “I haven’t seen neglect by color in REO homes in Orleans or Jefferson Parish.” He works in the city, the west bank and in Slidell.

Cindy Tuck, a broker in Gretna with Keller Williams, agreed that Fannie Mae makes exterior repairs with saleability in mind. “It’s a business with a product line,” she said. “They fix up homes that they think will sell faster first.” She’s skeptical that race plays a role in those decisions.

According to NFHA, serious discrepancies exist by neighborhood in other cities. Last week, Shanna Smith said that after its multi-year investigation, NFHA showed Fannie Mae proof of differing maintenance and marketing practices for foreclosures in white versus non-white areas in Washington, DC; Prince George’s County and Montgomery County, Maryland; and the metropolitan areas of Atlanta, Oakland, Philadelphia, Dayton, Baltimore, Dallas and Phoenix. “Fannie Mae continued to neglect its foreclosures in middle- and working-class communities of color after we gave them photographic evidence from 2009 to 2011,” she said.

Those non-white neighborhoods had already been hit by the nation’s mortgage crisis, Smith noted. The sub-prime mortgage debacle lasted from 2007 into 2010.

For its part, Fannie Mae strongly disagrees with NFHA’s allegations of discrimination, FNMA spokeswoman Alicia Jones said last week. “Our REO maintenance standards are designed to ensure that all properties are tended to and treated equally,” she said. “Over the years, we’ve continuously enhanced our REO maintenance practices.” For properties that need exterior covering, Fannie Mae introduced a transparent, polycarbonte system, known as clear boarding, to replace plywood installations. FNMA is using more technology in property inspections and has expanded its field staffs. “Through these actions, we’ve demonstrated our continued dedication to providing quality care to all communities,” Jones said.

Fannie Mae was founded in 1938 by Congress, towards the end the Great Depression, to invigorate the housing sector. While it doesn’t provide mortgages directly, FNMA is the nation’s biggest backer of 30-year, fixed-rate mortgages, providing liquidity. Fannie purchases and guarantees home mortgages. When a mortgage it owns goes into default, FNMA obtains title to the dwelling and assumes maintenance responsibilities. It markets the property to the public through www.HomePath.com and tries to get the best possible price. FNMA’s prefers to sell to owner-occupants whenever possible to keep neighborhoods stable.

Recently, the number of FNMA-foreclosed homes has declined in New Orleans and across the country. Fannie’s REOs nationwide totaled 41,973 when this year’s third quarter ended, versus 60,958 a year earlier and 166,787 in third-quarter 2010.

NFHA’s Fannie Mae study was partly funded by the U.S. Department of Housing and Urban Development. Last week HUD had no comment about the investigators’ findings, however. The NFHA includes 220 fair-housing groups, along with state and local civil-rights agencies.

This article originally published in the December 12, 2016 print edition of The Louisiana Weekly newspaper.