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Fannie Mae accused of racial discrimination in maintenance of REOs

In a complaint filed this week with federal housing officials, Fannie Mae was accused of showing a pattern of racial discrimination by allowing its stock of foreclosed properties to deteriorate in non-white neighborhoods, while doing a better job of maintaining and marketing properties in largely white areas.

The National Fair Housing Alliance (NFHA), a consortium of more than 200 private nonprofit housing organizations, filed the complaint Wednesday on behalf of itself and 19 other fair-housing groups with the U.S. Department of Housing and Urban Development (HUD).

NFHA said Fannie violated the Fair Housing Act through unequal treatment. Rundown real-estate owned (REOs) properties in non-white neighborhoods are contributing to blight, health and safety hazards and placing a burden on neighbors and the local governments, the complaint says.

“We are looking for Fannie to fix the issue,” NFHA Spokesman Kevin Paul said Thursday.

The organization said it spent five years investigating the condition of Fannie-owned REOs in 34 cities. Its investigation looked at the conditions of 2,106 properties, beginning in 2010.

Investigators evaluated the homes for deficiencies, such as boarded or broken windows and doors, trash and weedy lots, that might affect value, security and curb appeal. 

The investigation revealed that homes in largely white neighborhoods tended to be in better shape, or the neighborhoods had fewer homes with major problems.

NFHA said 50 percent of the REOs in middle-income or working-class white neighborhoods had fewer than five deficiencies, and just 8 percent of the homes in white areas had 10 or more deficiencies.

By contrast, investigators found that in black, Latino or predominantly non-white neighborhoods, 24 percent of the homes had fewer than five deficiencies. So, the percentage of relatively problem-free homes was less than half the amount as in white neighborhoods, according to the complaint.

Also, 22 percent of homes in non-white areas had major problems with 10 or more deficiencies, nearly three times the rate in largely white neighborhoods.

In a statement, Fannie denied the allegations.

"We strongly disagree with these allegations and firmly believe they have no merit,” Fannie said. “We are confident that our standards ensure that properties in all neighborhoods are treated equally, and we perform rigorous quality control to make sure that is the case. We remain dedicated to neighborhood stabilization efforts across the nation, including with respect to our maintenance of foreclosed properties."

NFHA has previously taken action against the big banks, and several vendors that manage the Fannie-owned REOs, on this same issue.


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