The green bungalow at 136 Chappell Road in northwest Atlanta brings a little bit of the country into the big city – a wooded lot, a big lawn, a wraparound front deck. But come in for a closer look and you’ll notice that the windows are boarded up, the wood siding has started to peel off, and two holes have opened in the front eaves. Old tires lean against one side, and the back door is missing. Inside, debris is strewn around the living room and mold grows on the walls.
A coalition of fair housing groups say those conditions are present in hundreds of foreclosed homes around the country that have been taken over by banks – and they claim that the new owners are not treating all homes equally.
The National Fair Housing Alliance (NFHA) and four sister organizations spent a year visiting bank-owned houses (also known as real-estate owned homes, or REOs) in 11 major cities across the country. In April, the groups released a report charging that once banks take possession, they do a far better job of maintaining and marketing homes in white neighborhoods than they do in minority neighborhoods.
The groups evaluated the maintenance and marketing of more than a thousand REOs in cities such as Atlanta, Dallas, and Washington, D.C. Their report concludes that the REOs in minority neighborhoods that they visited were 34 percent more likely to have significant trash and debris outside and 82 percent more likely to have broken or boarded windows. Bank-owned houses in white neighborhoods, they say, were 33 percent more likely to be marketed with “for sale” signs, which is critical to attracting owner occupants as buyers, rather than investors.
The NFHA has also recently filed complaints with the U.S. Department of Housing and Urban Development (HUD) against Wells Fargo and U.S. Bank, and hopes to file complaints against more banks in the future. The documents allege that both banks have failed to maintain and market their REOs in minority versus white neighborhoods and thus have violated the 1968 Fair Housing Act, which makes it illegal to discriminate in housing and housing-related activities.
U.S. Bank spokesperson Teri Charest responds that because the bank has not received details of specific properties involved in the complaint, it’s impossible to know whether it owns them. When the bank does own a house, she says, it has a “strong and comprehensive” process for inspecting and maintaining properties. Wells Fargo did not respond to a request from The Fiscal Times for comment, but two weeks ago a bank spokesperson told Spanish-language newspaper El Hispano that the bank “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.”
“These lenders are focused on the bottom line. I’d be surprised if [the banks] neglect properties that have value…for racial reasons.”
NFHA director Shanna Smith says that before they visited the properties, they verified that Wells Fargo and U.S. Bank were the owners of record, using data from sources like federal databases, county tax records, and private real estate data vendors.
Ryan Pulliam, a contractor and CEO of All Seasons Eviction, which offers property preservation services in the suburbs of Washington, D.C., agrees that in the minority neighborhoods where he works, REOs are less well kept. But he attributes the disparity to bank mismanagement, rather than any overt discrimination, calling the big banks’ contracting process “a mess.”
Pulliam claims that banks can take months to approve bids for work, and sometimes use more than one main contractor to service houses, which can lead to contradictory orders to subcontractors. He adds that because there’s not much difference in the cost of repairing and maintaining houses of different values, banks prioritize fixing up, maintaining, and selling homes in more expensive areas. The local banks, he says, do a far better job of maintaining their REOs.
Alan Mallich, a housing and community development scholar at The Brookings Institution, thinks the disparate treatment may have more to do with economics than race. “These lenders typically are large impersonal entities that are focused on the bottom line. I’d be a little surprised if they neglect properties that have value…for racial reasons.” But he adds that houses in neighborhoods of color might be undervalued compared with economically similar white areas. That, in turn, might lead banks to be reluctant to spend money on REOs in those areas because of their lower values.
Still, that doesn’t relieve banks of their responsibility for upkeep, he says: Once a bank takes title to a property, it has a “legal and moral responsibility” to maintain it. And Smith notes that they are not asking for major renovations on houses in these neighborhoods, but basic upkeep – fixing gutters, removing trash and mowing yards.
A HUD spokesperson says the agency can’t comment on the NFHA’s complaint. Under agency policy, if HUD finds the claim has merit, they’ll investigate and invite the NFHA and the banks to negotiate an agreement. If the banks don’t come to the table, the case goes before a HUD administrative law judge, or the NFHA could ask the Department of Justice to pursue it in federal civil court. Smith says the coalition would like to work out an agreement to change bank practices. But if that doesn’t happen, they’re prepared to go to court.
Whatever the outcome, those who live near bank REOs are “furious,” says Gail Williams of Metro Fair Housing of Atlanta, which participated in the investigation. According to a study by the Appraisal Institute, an overgrown yard or deteriorating home can reduce the value of surrounding homes by as much as 15 percent. In surveys of the people who live next to REO homes, NFHA says neighbors often step in to cut the grass and clean up debris themselves.
So even while real estate starts to recover around the country, say the advocates, in these neighborhoods, the housing crash lives on.