Fannie Mae has reached a $53 million settlement in a nearly six-year-old complaint filed by the National Fair Housing Alliance (NFHA) and a coalition of local fair housing organizations that accused the enterprise of unequal treatment of real estate-owned (REO) properties in Black and Latino communities.
NHFA and 20 local fair housing associations filed a lawsuit in 2016 in U.S. District Court for the Northern District of California alleging that Fannie Mae did not conduct routine maintenance and marketing of its REO properties in predominantly Black and Latino neighborhoods, but did maintain and market REO properties in predominantly white neighborhoods.
According to the complaint, the NHFA and coalitions conducted a lengthy nationwide investigation of over 2,300 Fannie Mae REO properties that uncovered the maintenance and marketing disparities and presented them to Fannie Mae, but the enterprise refused to make changes. The complaint alleges Fannie Mae’s actions had a significant harmful impact on neighborhoods of color throughout the country, threatening the health and safety of residents and diminishing property values.
Before reaching the settlement, Fannie Mae made two attempts to dismiss the claims against it that failed. “In March 2018, the court upheld the coalition’s claims for liability based on a disparate impact theory and granted leave to amend the complaint to include additional allegations of discriminatory intent,” NHFA said in a release. It added, “In August 2019, the court held that the allegations, if proven true, make out a claim that Fannie Mae engaged in intentional discrimination with respect to its REO maintenance, and affirmed plaintiffs’ rights to secure attorneys’ fees and injunctive relief under the Fair Housing Act.”
The NFHA and coalition members say they have spent $46.7 million in the affected minority communities to make repairs and to educate about REO best practices.
Relman Colfax PLLC, the national civil rights law firm that represented NHFA and the coalition, said in a statement that the $53 million 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,” the statement said. “The relief will fulfill a central purpose of the Fair Housing Act: ensuring equitable treatment of neighborhoods regardless of their racial makeup.”
NFHA said it and the local fair housing organizations that participated in the lawsuit will use over $35 million of the settlement to “promote homeownership, neighborhood stabilization, access to credit, property rehabilitation, and residential development in the 39 metropolitan areas at issue in the case.”
It added that the “plaintiffs will manage and disburse the settlement funds, providing much-needed grants, including down-payment assistance for first-generation homebuyers and renovations for homes that languished in foreclosure. The grants will also include innovative programs and partnerships to promote fair housing.”
National Association of Realtors President Leslie Rouda Smith issued a statement applauding the settlement agreement.
“Fannie Mae coming to the table and agreeing to pay this restitution sends a clear message that the maintenance and marketing of foreclosed homes must be done fairly in all areas,” Smith said. “Realtors have played an increasingly important role in the market for maintaining and marketing REO properties, as bulk sales to investors decline. NAR is committed to supporting local communities and expanding opportunities for homeownership for all Americans, in accordance with our Code of Ethics and the Fair Housing Act."
