Landmark $53M Settlement In

EVANSTON, IL — North suburban fair housing nonprofit Open Communities will receive $1 million from a landmark housing discrimination settlement with Fannie Mae.

Evanston-based Open Communities joined with the National Fair Housing Alliance and 19 other fair housing organizations across the country to file a lawsuit in a Northern California federal court in December 2016.

Their complaint alleged Fannie Mae, which takes ownership of foreclosed properties, had engaged in racially discriminatory policies in predominantly Black and Latino neighborhoods following the 2008 housing crisis. It cited a four-year investigation of more than 2,300 properties owned by Fannie Mae and covered by the Fair Housing Act.

The investigation looked at ZIP codes with low rates of racial diversity and high rates of foreclosures in 38 metropolitan areas prior to 2015. It found significantly higher rates of maintenance deficiencies, exterior damage and broken or boarded-up windows in Fanny Mae’s Real Estate Owned, or REO, properties in predominantly non-white areas, according to the suit.

“75.7% of the Fannie Mae REO properties in communities of color had 5 or more maintenance deficiencies or problems, while 47.8% of the Fannie Mae REO properties in predominantly white neighborhoods had 5 or more maintenance deficiencies or problems,” the complaint alleged.

In August 2019, White again ruled the suit could continue into discovery on the questions of “disparate treatment” and “disparate impact” by Fannie Mae.

“As the Court found in its previous order, there are sufficient allegations to establish a claim for disparate impact, considering the disparate impact and segregative effect of Fannie Mae’s actions. However, the Court reviews the categories of the amendments concerning Fannie Mae’s conduct and the Court finds that Plaintiffs have set out sufficient allegations of intentional conduct,” White said in his order on the motion to dismiss the amended complaint.

“Plaintiffs argue that the statistical margin of maintenance deficiencies supports their conclusion that such effect must be the result of intentional racial discrimination,” the judge said. “As the Court has already found, if a plaintiff could base intentional discrimination on allegations of disparity, every disparate impact claim would suffice to plead a disparate treatment claim. It is simply not enough to demonstrate a disparate impact to make a claim of intentional disparate treatment.”

By December 2019, the parties were engaged in settlement discussions, which resulted in an agreement late last year — before the case could proceed through the fact discovery process.

The settlement agreement calls for Fannie Mae to pay a $53 million cash payment, with $35.39 million of that going to “address community needs, as determined by Plaintiffs, including addressing homeownership, neighborhood and/or community stabilization, access to credit, property rehabilitation, residential development in African American and Latino communities, fair housing education and outreach, counseling, and other fair housing activities.”

The case marks the first time a federal judge has affirmed that federal fair housing laws cover REO properties, according to a statement from Relman Colfax, the plaintiffs’ Washington, D.C.-based law firm.

“The settlement agreement will have far-reaching implications. The plaintiffs will invest the vast majority of the settlement monies directly back into the communities that were harmed,” it said. “The relief will fulfill a central purpose of the Fair Housing Act: ensuring equitable treatment of neighborhoods regardless of their racial makeup.”

Open Communities was joined in the suit by two other local plaintiffs, Wheaton-based HOPE Fair Housing Center and Homewood-based South Suburban Housing Center.

According to an Open Communities spokesperson, about a third of its $1 million portion of the settlement is an unrestricted reimbursement of damages and expenses from alleged Fair Housing Act violations, while the rest will be set aside for increased assistance to individuals, collaborations with community partners and other programming.

“We are proud to be part of the collaboration within the Fair Housing enforcement community to bring this issue to the forefront,” Open Communities CEO Cheryl Lawrence said in a statement. “The success, in this case, brings us one step further in the advancement of racial equity in housing in the Chicago metropolitan area.”


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