Kaine Calls For Investigation, Action To Address Mortgage Industry Housing Discrimination In Minority Communities

WASHINGTON, D.C. – Today, U.S. Senator Tim Kaine joined a group of senators in sending a letter to federal housing, finance, and consumer protection regulators calling for an investigation into potential violations of the Fair Housing Act by banks and lenders neglecting the maintenance of foreclosed homes based on the racial makeup of communities where the properties are located. The letter asks the regulators to take appropriate actions to put a stop to any unequal treatment. Kaine spent much of his legal career fighting for affordable, non-discriminatory housing policies.  In 1984, he led the first meeting of the Virginia Coalition to End Homelessness.  As a Richmond lawyer, he represented Housing Opportunities Made Equal, Inc. (HOME) in their historic suit against Nationwide Mutual Insurance for industry-wide redlining practices in the issuance of homeowners insurance. 

In their letter, the senators pointed to a report by the National Fair Housing Alliance (NFHA) which found that real estate owned (REO) properties in communities of color “were 2.2 times more likely to have significant amounts of trash and debris on the premises and 2.3 times more likely to have unsecured, broken, or damaged doors than properties in comparable predominantly white communities.”

“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. “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.”

The letter was co-signed by Senators Robert Menendez (D-NJ), Sherrod Brown (D-OH), Elizabeth Warren (D-MA), Barbara Boxer (D- CA.), Kirsten Gillibrand (D-NY), Mazie Hirono (D-HI), Cory Booker (D-NJ), Martin Heinrich (D-NM), Benjamin Cardin (D-MD), Tammy Baldwin (D-WI); Dick Durbin (D-IL); Richard Blumenthal (D-CT), and Chuck Schumer (D-NY). 

In addition, the following organizations have come out in support of the senators’ letter: The American Civil Liberties Union (ACLU), 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 (NAACP), National Coalition for Asian Pacific American Community Development (CAPACD), National Council of La Raza (NCLR), National Fair Housing Alliance (NFHA), National Low Income Housing Coalition, PolicyLink, and Poverty & Race Research Action Council.

A copy of today’s letter is available below:

June 23, 2015

The Honorable Julián Castro
Secretary
U.S. Department of Housing and Urban Development
451 7th Street, SW
Washington, DC 20410

The Honorable Janet Yellen
Chair
Federal Reserve Board of Governors
20th Street and Constitution Ave, NW
Washington, DC 20551

The Honorable Thomas Curry
Comptroller
Office of the Comptroller of the Currency
400 7th Street, SW
Washington, DC 20219

The Honorable Martin Gruenberg
Chair
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429

The Honorable Richard Cordray
Director
Consumer Financial Protection Bureau
1700 G Street, NW
Washington, DC 20552

The Honorable Melvin Watt
Director
Federal Housing Finance Agency
400 7th Street, SW
Washington, DC 20024

The Honorable Debbie Matz
Chair of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314

Dear Secretary Castro, Chair Yellen, Comptroller Curry, Chairman Gruenberg, Director Cordray, Director Watt, and Chair Matz:

We write to bring to your attention troubling reports of disparities in the maintenance and marketing of foreclosed homes based on the racial makeup of communities in which the properties are located.  We know you share our strong commitment to protecting all Americans from discrimination, regardless of race, background, or belief, so we respectfully urge you to investigate these reports and take appropriate actions to remedy these problems.

We have reviewed with great interest and concern a report of the National Fair Housing Alliance (NFHA), which details findings from inspections of more than 2,400 real estate owned (REO) properties in 29 metropolitan areas, owned or managed by 11 different lenders, the Federal Housing Administration, or the government-sponsored enterprises.[1]  The report found that REO properties in communities of color were much more likely to have a higher number of maintenance and marketing deficiencies, leading to destabilizing outcomes for families and neighborhoods.[2]

As you know, subprime mortgage lending has inflicted especially high damage in communities of color.  According to the Center for Responsible Lending, for mortgages originated between 2004 and 2008, African Americans and Latinos were nearly twice as likely as white borrowers to have at least one “high risk” feature or condition in their loan, placing them at much greater risk of delinquency and default.[3]  When all other factors are held equal, including credit score and income, African American and Latino homebuyers were 80 percent and 70 percent, respectively, more likely to receive a subprime loan than comparable white homebuyers.[4]  Improper and discriminatory steering of borrowers of color into higher cost, subprime mortgage loans likely significantly contributed to these disparities, as demonstrated by high-profile litigation settlement agreements with mortgage originators such as Countrywide.[5]

According to NFHA’s report, the same communities who were victimized by predatory mortgage lending practices may now be facing additional burdens from unequal and inadequate management of foreclosed homes.  NFHA found that bank-owned properties in communities of color were 2.2 times more likely to have significant amounts of trash and debris on the premises and 2.3 times more likely to have unsecured, broken, or damaged doors than properties in comparable predominantly white communities.[6]  Some cities had even more pronounced disparities, such as Memphis, Tennessee, where REO properties in communities of color were almost 9 times more likely to have significant amounts of trash and debris than REOs in majority-white communities, or in Hampton Roads, Virginia, where REO properties in neighborhoods of color were 6 times more likely to have unsecured, damaged, or boarded doors than properties in comparable predominantly white communities.[7]  These statistics provide a mere snapshot of the far-reaching and serious consequences facing communities with high volumes of REO properties that receive inadequate attention from the banks and lenders responsible for their maintenance.

As NFHA’s report illustrates, beyond the families who directly lose their homes, the costs of foreclosures extend to those who remain in neighborhoods with foreclosed properties.  Particularly if foreclosed homes are not properly maintained, neighbors can see their own property values decline and experience deep losses in local revenues to fund public schools, public safety, and other community priorities.[8]  They can also be stuck with the bill as taxpayers if municipalities are left accountable for costly expenses in the upkeep of neglected properties.

As you are well aware, the Department of Housing and Urban Development’s regulations implementing the Fair Housing Act make clear that the differential treatment of REO properties based on the racial makeup of a community or neighborhood is a violation of the Fair Housing Act.[9]  The findings of NFHA’s report are troubling at best, and at worst, indicate illegal discrimination that must be remedied.

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.  We also urge you to take appropriate actions to remedy these problems and ensure they do not happen again in the future, including consulting with fair housing advocates and representatives of the affected communities to identify additional regulatory, supervisory, or enforcement steps that might be needed to cure existing disparities and prevent future deficiencies. 

Residents and communities across the country look to your agencies for assurances that mortgage lenders and servicers will act equitably in the disposition of REO homes, not improperly concentrating resources in some communities while withholding funds from others.  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.

Thank you for your prompt attention to this matter.  We look forward to your response.

Sincerely,

###

KAINE PIDE QUE SE INVESTIGUEN PRÁCTICAS DISCRIMINATORIAS DE INDUSTRIA HIPOTECARIA EN COMUNIDADES MINORITARIAS

Los bancos responsables del mantenimiento y comercialización de viviendas hipotecadas en comunidades minoritarias descuidan propiedades

WASHINGTON, DC - El Senador Tim Kaine  se unió a un grupo de senadores para enviar una carta a las oficinas de vivienda, finanzas, y protección al consumidor, exigiendo que se realice una investigación sobre posibles violaciones de la Ley de Vivienda Justa (Fair Housing Act, en inglés) por bancos y prestamistas que descuidaron el mantenimiento de viviendas hipotecadas en comunidades minoritarias. La carta le pide a los reguladores adoptar medidas adecuadas para poner fin a cualquier trato injusto.

En su carta, los senadores citan un reporte de la Alianza Nacional por una Vivienda Justa (NFHA, por sus siglas en inglés) que encontró que las propiedades de la industria de bienes y raíces (REO, por sus siglas en inglés) en las comunidades de color "eran 2,2 veces más propensas a tener cantidades significativas de basura y escombros y es 2,3 más probable que tengan puertas sin cerrajas, rotas o dañadas en comparación a propiedades en comunidades predominantemente blancas".

"Les instamos contundentemente– como los reguladores de las entidades encargadas del mantenimiento estas propiedades para venderlas a compradores calificados— a que investiguen este asunto", escribieron los senadores. "Estamos seguros de que están de acuerdo que la estabilización de las comunidades más afectadas por la crisis hipotecaria de nuestro país requerirá que las instituciones financieras mantengan y vendan los hogares REO adecuadamente sin importar el color de la piel o la nación de origen de los propietarios que vivan en la cuadra".

La carta también fue firmada por los senadores Sherrod Brown, Elizabeth Warren, Barbara Boxer, Kirsten Gillibrand, Mazie Hirono, Cory Booker, Martin Heinrich, Ben Cardin, Tammy Baldwin, Dick Durbin, Richard Blumenthal y Chuck Schumer.

Adicionalmente, las siguientes organizaciones también apoyan la petición de los senadores: The American Civil Liberties Union (ACLU), 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 (NAACP), National Coalition for Asian Pacific American Community Development (CAPACD), National Council of La Raza (NCLR), National Fair Housing Alliance (NFHA), National Low Income Housing Coalition, PolicyLink y Poverty & Race Research Action Council.

A continuación, la carta en su totalidad (en inglés):

June 23, 2015

The Honorable Julián Castro
Secretary
U.S. Department of Housing and Urban Development
451 7th Street, SW
Washington, DC 20410

The Honorable Janet Yellen
Chair
Federal Reserve Board of Governors
20th Street and Constitution Ave, NW
Washington, DC 20551

The Honorable Thomas Curry
Comptroller
Office of the Comptroller of the Currency
400 7th Street, SW
Washington, DC 20219

The Honorable Martin Gruenberg
Chair
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429

The Honorable Richard Cordray
Director
Consumer Financial Protection Bureau
1700 G Street, NW
Washington, DC 20552

The Honorable Melvin Watt
Director
Federal Housing Finance Agency
400 7th Street, SW
Washington, DC 20024

The Honorable Debbie Matz
Chair of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314

Dear Secretary Castro, Chair Yellen, Comptroller Curry, Chairman Gruenberg, Director Cordray, Director Watt, and Chair Matz:

We write to bring to your attention troubling reports of disparities in the maintenance and marketing of foreclosed homes based on the racial makeup of communities in which the properties are located.  We know you share our strong commitment to protecting all Americans from discrimination, regardless of race, background, or belief, so we respectfully urge you to investigate these reports and take appropriate actions to remedy these problems.

We have reviewed with great interest and concern a report of the National Fair Housing Alliance (NFHA), which details findings from inspections of more than 2,400 real estate owned (REO) properties in 29 metropolitan areas, owned or managed by 11 different lenders, the Federal Housing Administration, or the government-sponsored enterprises.[1]  The report found that REO properties in communities of color were much more likely to have a higher number of maintenance and marketing deficiencies, leading to destabilizing outcomes for families and neighborhoods.[2]

As you know, subprime mortgage lending has inflicted especially high damage in communities of color.  According to the Center for Responsible Lending, for mortgages originated between 2004 and 2008, African Americans and Latinos were nearly twice as likely as white borrowers to have at least one “high risk” feature or condition in their loan, placing them at much greater risk of delinquency and default.[3]  When all other factors are held equal, including credit score and income, African American and Latino homebuyers were 80 percent and 70 percent, respectively, more likely to receive a subprime loan than comparable white homebuyers.[4]  Improper and discriminatory steering of borrowers of color into higher cost, subprime mortgage loans likely significantly contributed to these disparities, as demonstrated by high-profile litigation settlement agreements with mortgage originators such as Countrywide.[5]

According to NFHA’s report, the same communities who were victimized by predatory mortgage lending practices may now be facing additional burdens from unequal and inadequate management of foreclosed homes.  NFHA found that bank-owned properties in communities of color were 2.2 times more likely to have significant amounts of trash and debris on the premises and 2.3 times more likely to have unsecured, broken, or damaged doors than properties in comparable predominantly white communities.[6]  Some cities had even more pronounced disparities, such as Memphis, Tennessee, where REO properties in communities of color were almost 9 times more likely to have significant amounts of trash and debris than REOs in majority-white communities, or in Hampton Roads, Virginia, where REO properties in neighborhoods of color were 6 times more likely to have unsecured, damaged, or boarded doors than properties in comparable predominantly white communities.[7]  These statistics provide a mere snapshot of the far-reaching and serious consequences facing communities with high volumes of REO properties that receive inadequate attention from the banks and lenders responsible for their maintenance.

As NFHA’s report illustrates, beyond the families who directly lose their homes, the costs of foreclosures extend to those who remain in neighborhoods with foreclosed properties.  Particularly if foreclosed homes are not properly maintained, neighbors can see their own property values decline and experience deep losses in local revenues to fund public schools, public safety, and other community priorities.[8]  They can also be stuck with the bill as taxpayers if municipalities are left accountable for costly expenses in the upkeep of neglected properties.

As you are well aware, the Department of Housing and Urban Development’s regulations implementing the Fair Housing Act make clear that the differential treatment of REO properties based on the racial makeup of a community or neighborhood is a violation of the Fair Housing Act.[9]  The findings of NFHA’s report are troubling at best, and at worst, indicate illegal discrimination that must be remedied.

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.  We also urge you to take appropriate actions to remedy these problems and ensure they do not happen again in the future, including consulting with fair housing advocates and representatives of the affected communities to identify additional regulatory, supervisory, or enforcement steps that might be needed to cure existing disparities and prevent future deficiencies.

Residents and communities across the country look to your agencies for assurances that mortgage lenders and servicers will act equitably in the disposition of REO homes, not improperly concentrating resources in some communities while withholding funds from others.  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.

Thank you for your prompt attention to this matter.  We look forward to your response.

Sincerely,

###