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HUD Applauds Settlement on the Maintenance of REO Properties

HUD BuildingThe U.S. Department of Housing & Urban Development (HUD) has praised a recent settlement between Fannie Mae, the National Fair Housing Alliance (NFHA), and local fair housing organizations regarding potential disparities in the maintenance and marketing of real estate-owned (REO) properties.

HUD applauded the decision between the NFHA and 20 fair housing organizations who reached a $53 million agreement with Fannie Mae. The monetary settlement resolves the groups’ claims that Fannie Mae treated homes it owned in majority-Black and Latino communities unfavorably. The $53 million settlement will help rebuild and strengthen communities of color in 39 metros. The plaintiffs alleged that Fannie Mae maintained and marketed its foreclosed homes in predominantly White neighborhoods, while allowing homes in predominantly Black and Latino neighborhoods to fall into disrepair and that this differential treatment exacerbated the damage caused by the 2008 mortgage crisis and impeded recovery from the crisis in neighborhoods of color.

“It is our hope that settlement of these cases will bring about much needed positive outcomes for these undeserved communities,” said Demetria L. McCain, Principal Deputy Assistant Secretary for HUD’s Office of Fair Housing and Equal Opportunity (FHEO). “We also hope mortgage lenders across the country will take steps to avoid fair housing violations in their own REO portfolios.”

The case marked the first time a federal court confirmed the nation’s fair housing laws cover the maintenance and marketing of REO properties.

The plaintiffs’ 2016 allegations against Fannie Mae arose after a four-year investigation of more than 2,300 Fannie Mae-owned foreclosed properties in 39 metropolitan areas in the country. The plaintiffs collected more than 49,000 photographs revealing poorly maintained properties in Black and Latino communities, particularly as compared to properties in predominantly White neighborhoods.

NFHA and the plaintiff fair housing organizations will use approximately $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. 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.

Just last week, HUD’s Office of Inspector General (OIG) found that the Los Angeles Homeless Services Authority (LAHSA) failed to utilize millions in federal homeless assistance funds that later expired. According to HUD’s findings, LAHSA did not satisfactorily enforce HUD’s quality housing standards, as 50 of the 68 housing units examined by HUD failed to meet minimum quality housing standards.

“The Authority did not properly use its program funds and program tenants lived in units that were not decent, safe, and sanitary,” said the audit report. “Based on our statistical sample, we estimate that over the next year, HUD will pay more tat $11.5 million in housing assistance payments on units with material housing quality standards violations if inspection procedures do not improve.”

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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