Democratic Senators Call For Investigation of Possible Discrimination in REO Maintenance

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A group of Democratic Senators led by Bob Menendez (D- New Jersey) has written a letter to the leaders of several government agencies calling for an investigation to determine if banks and lenders violated the Fair Housing Act by neglecting maintenance of foreclosed and REO homes in minority-dominated neighborhoods.

The Senators cited a recent report by the National Fair Housing Alliance (NFHA) which alleged that REO properties in minority-dominated neighborhoods were more than twice as likely to have deficiencies such significant amounts of trash and debris, and unsecured, broken, or damaged doors than REO properties in predominantly white neighborhoods. The report covered more than 2,400 REO properties in 29 metro areas, owned or managed by 11 lenders.

“We strongly urge you—as regulators of the entities responsible for ensuring these properties are maintained, marketed, and sold to qualified buyers—to investigate this issue,” the Senators wrote in their letter. “As we are sure you agree, stabilization for our country’s communities most impacted by the foreclosure crisis will require financial institutions to properly maintain and market REO homes regardless of the color of the skin or nation of origin of the other homeowners who live on the block.”

Several organizations have come out in support of the Senators’ letter, including (alphabetically) the American Civil Liberties Union, Americans for Financial Reform, Center for Responsible Lending, Lawyers’ Committee for Civil Rights Under Law, Leadership Conference on Civil and Human Rights, National Association for the Advancement of Colored People, National Coalition for Asian Pacific American Community Development, National Council of La Raza, National Fair Housing Alliance, National Low Income Housing Coalition, PolicyLink, and Poverty and Race Research Action Council, according to Menendez’s website.

“Foreclosed properties remain in neighborhoods across the country, but we must do all that we can to make sure they are equally well-taken care of to get them in the hands of homeowners,” said Shanna L. Smith, President and CEO of the National Fair Housing Alliance. “We know that poorly maintained properties have a higher likelihood of selling to absentee investors, deflate neighborhood property values and contribute to negative health outcomes for residents who live near these eyesores. The federal financial and housing regulators have an opportunity and obligation to ensure that foreclosed homes are used as agents of community stabilization, not to further depress property values and the local tax base.”

Click here to view a copy of the Senators’ letter. Co-signers of the letter were Sherrod Brown (D-Ohio), Elizabeth Warren (D-Massachusetts), Barbara Boxer (D-California), Kirsten Gillibrand (D-New York), Mazie Hirono (D-Hawaii), Cory Booker (D-New Jersey), Martin Heinrich (D-New Mexico), Ben Cardin (D-Maryland), Tammy Baldwin (D-Wisconsin), Dick Durbin (D-Illinois), Richard Blumenthal (D-Connecticut), Chuck Schumer (D-New York), and Tim Kaine (D-Virginia).  Mendendez, Brown, Warren, and Schumer are members of the Senate Banking Committee, and Menendez is the Ranking Member of the Senate Subcommittee on Housing, Transportation, and Community Development.

The letter was addressed to HUD Secretary Julián Castro, Fed Chair Janet Yellen, Comptroller of the Currency Thomas Curry, FDIC Chair Martin Gruenberg, CFPB Director Richard Cordray, NCUA Chair Debbie Matz, and FHFA Director Melvin Watt.

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