It took six years, but a national mortgage company has finally agreed to accept responsibility for its racial bias in handling foreclosed property.
In a landmark settlement announced Monday, Fannie Mae has agreed to pay $53 million in compensation to end a 2016 suit that alleged the government-backed mortgage giant allowed foreclosed homes in majority Black and Latino communities to deteriorate while ensuring similar homes in predominantly white neighborhoods were maintained.
Fannie Mae also has agreed to implement practices to prevent a recurrence of such mismanagement of foreclosed property in the future, including implementing improved maintenance practices, giving individuals rather than investors priority for foreclosure purchases and training its employees and contractors in fair housing requirements.
The Richmond-based Housing Opportunities Made is among 20 fair housing groups that will share in the settlement.
“This settlement recognizes the wrongs done to communities of color in the Richmond region that were particularly hard hit during the foreclosure crisis,” stated Monica L. Jefferson, HOME’s interim president and chief executive officer.
Led by the National Fair Housing Alliance, HOME and 19 other affiliates filed the ground-breaking suit that grew out of the great foreclosure bubble that began with the banking collapse of 2008. Hundreds of thousands of faulty and poorly underwritten home loans went into default.
The settlement, ironically, comes amid a housing boom that has resulted in all of the former foreclosed properties being snapped up, renovated and returned to the market at far higher prices.
According to HOME, this was the first federal case that confirmed the nation’s fair housing laws cover the maintenance and marketing of foreclosed property.
The case was based on data that HOME and the 19 other organizations gathered on Fannie Mae’s handling of 2,300 foreclosed properties in 39 localities, including 40 in Richmond and surrounding localities. The U.S. Department of Housing and Urban Development provided grants that helped the groups develop their evidence.
The suit alleged that 20 percent of Fannie Mae’s foreclosed properties in Black and Latino neighborhoods had 10 or more maintenance issues, including holes in exterior walls and overgrown yards, while such homes in predominantly white areas rarely had such issues.
Funds from the settlement also will provide “significant financial resources to respond to community needs,” Ms. Jefferson noted.
After the plaintiff’s lawyers and other expenses are paid, HOME and the other groups will split $35 million. HOME is to receive $1.1 million as its share. The 50-year-old fair housing watchdog plans to use $750,000 to bolster services to the communities Fannie Mae harmed, such as down payment assistance for buyers and renovation assistance for owners, with the remainder going to existing programs.