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Fannie Mae accused of discrimination in Indy, 37 other metros

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Indianapolis is among 38 metropolitan areas included in a discrimination lawsuit filed Monday against the Federal National Mortgage Association, commonly known as Fannie Mae.

The suit, filed in federal district court in San Francisco, accuses the organization of showing “a stark pattern of discriminatory conduct” in how it maintains its foreclosed properties. The suit details evidence, including tens of thousands of photographs taken from 2011–2015 at 2,300 foreclosures owned by Fannie Mae, showing disparities in the condition of those properties related to their location in white-majority communities versus minority-majority communities. 

Shanna Smith, president and CEO of the National Fair Housing Alliance (NFHA), said her organization first became aware of the disparities in 2009 and brought them to Fannie Mae’s attention.

“We shared photographs with them and we asked them to look at their business model, correct the problems,” Smith said in a webinar announcing the lawsuit. “When we found they were not cooperating and making appropriate changes, we expanded the initial investigation.” 

Investigators from more than 20 civil rights groups nationwide, including the Fair Housing Center of Central Indiana, evaluated more than 30 specific points at each property related to protecting, securing and marketing the homes, such as the condition of the lawn, shrubbery and other plants; the integrity of doors and windows; the condition of fences, roofs, porch steps and handrails, gutters and other parts of the home; and the presence of graffiti, trash, dead animals, water damage and mold.

In Indianapolis, properties in communities of color were found to have unsecured, broken or boarded windows; overgrown or dead shrubbery; and trash or debris.

According to the lawsuit, Fannie Mae-owned properties in predominantly white neighborhoods were more likely to have regularly maintained lawns, secure and intact windows and doors, leaves raked, graffiti erased and more.

Amy Nelson, executive director of the Fair Housing Center of Central Indiana, said such issues put neighborhoods of color at a disadvantage.

“It is infuriating that despite Fannie Mae being put on notice of this issue as far back as 2009, we continue to see their failure to adequately market and maintain their foreclosures in majority neighborhoods of color,” Nelson said in a statement. “These neighborhoods will continue to struggle and lag behind any recovery as long as Fannie Mae, and others like them, fail to properly maintain the homes they own.”

Smith, with NFHA, said the poor maintenance practices keep foreclosed homes in communities of color vacant. In some cases, the homes aren’t even marketed with for sale signs in the yard, and the impact goes beyond just home values in the community.

Smith mentioned research that has shown a health impact on people living near foreclosed properties, including stress, high blood pressure and asthma.

In properties with trash and standing water, mosquitos and rodent infestations pose health concerns as well, Smith said.

Fannie Mae is far from the first major lender to be accused of such practices.

Other complaints involving Indianapolis have been filed against Bank of America, Safeguard Properties and US Bank. Wells Fargo has had similar issues in the past, but Nelson said they’ve set a positive example of how such complaints can come to a resolution.

According to NFHA, Wells Fargo gave $30 million to the organization to be invested in communities harmed by its “disparate treatment” of foreclosure properties. The money has been used for home repair funds, foreclosure prevention, financial literacy education and more.

“Wells Fargo stepped up,” Nelson told the Recorder in September. “They made some changes to their process of how foreclosures were maintained, including having a set-aside period for owner-occupants to have first shots at those properties rather than going to investors and still sitting. There’s some great guidance there of things that could be done in order to resolve the case in a satisfactory way.”

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