A recent investigation found that banks’ record for maintaining their properties in African-American neighborhoods is worse than in white neighborhoods. According to the “Here Comes the Bank, There Goes Our Neighborhood: How Lenders Discriminate in the Treatment of Foreclosed Homes” report compiled by four fair-housing organizations, banks are discriminating in the treatment of their properties, as they generally take greater care to maintain and secure the properties that they own in white neighborhoods than they do in African-American neighborhoods.
The investigation was a yearlong study and looked at the ways that banks secure, maintain and market the foreclosed properties they own. It involved 624 bank-owned properties in Washington, D.C.’s Maryland suburbs; Dayton, Ohio; New Haven and Hartford, Connecticut; and Richmond, Virginia. The fair housing organizations that conducted the study included the National Fair Housing Alliance in Washington, D.C. and three of its member organizations – the Miami Valley Fair Housing Center, the Connecticut Fair Housing Center, and Housing Opportunities Made Equal out of Richmond, Virginia. The report evaluated the maintenance of bank-owned homes in their local area on a 100-point scale, subtracting points when properties were poorly maintained or created an eye sore with poor curb appeal.
“We were, unfortunately, not surprised by the findings of the report. As we analyzed the results of our investigation, we quickly saw that the ways in which banks handle foreclosed properties is really the latest step in the financial services industry’s long history of either neglecting or abusing communities of color,” says Ben Clark, National Fair Housing Alliance. “In the twentieth century, segregated communities have been poorly served by institutions that offer safe and sustainable credit and have instead had to rely upon fringe products and payday lending. With this history, it isn’t surprising to see the financial services industry again turning its back on the communities that currently suffer greatly because of the industry’s past indiscretions,” he says.
Real Estate expert Robert Shumake, too, was not surprised by the findings. “The report is not surprising because even without statistical evidence to validate it, it merely takes a concerned consumer or homeowner to take his/her own private tour of a neighborhood that is predominately white, and then take a similar tour of its minority counterpart. All the evidence one would need is in the staggering differences in upkeep and appearance, and it doesn’t take a study to show this,” says Shumake, CEO and founder of Inheritance Capital Group, LLC, (ICG), a private equity commercial real estate firm with international capabilities based in Southfield, Michigan. Properties in white neighborhoods were well-maintained and had trash-free lawns, secured entrances while the properties in African-American and Latino neighborhoods had such problems as cracked foundations, leaky roofs and “warning” signs.
Despite the discouraging finds, Clark says he feels the report will make a difference. “We are using this report to raise awareness and generate interest around the issue of foreclosed properties, their maintenance and their effects on communities,” he explains. “We are approaching federal regulators, federal agencies and members of Congress to discuss our findings. We urge banks to take the study’s findings and recommendations seriously and institute policies that will eliminate racial disparities in their handling of Real Estate-Owned (REO) issues. If they don’t on their own, though, we will consider all available options to bring justice and fairness to communities that have been harmed because of discriminatory disposition of REO properties,” he says.
The findings will, notes Shumake, in part force banks to alter their current practices. “A report like this can make a difference because it shines a bright light on a practice that is usually ignored or thought to not have a solution. Banks will have no choice but to take action and rectify their neglect of minority neighborhoods and properties,” says Shumake, author of For Entrepreneurs Who Considered Suicide When Business Got Tough. “With the housing market in peril, addressing the problem in the report will and should serve to contribute to a higher rate of home ownership by worthy tenants in these lacking areas, which, in turn, will raise the property values of the neighborhood as a whole,” he says.
If someone feels a bank has discriminated against him or her, Clark says to take action. “Somebody who believes he or she is being discriminated against by a bank when facing foreclosure should immediately notify a local fair housing center or the National Fair Housing Alliance for assistance in filing a complaint with the Department of Housing and Urban Development. Reporting discrimination as it occurs remains the best way to confront it,” he points out. “Furthermore, any homeowner facing foreclosure should also oimmediately contact a HUD-certified housing counselor who can assist them in negotiating with the bank.”
Founded in 1988, the National Fair Housing Alliance is a consortium of more than 220 private, non-profit fair housing organizations, state and local civil rights agencies and individuals from throughout the United States.