Judge Advances Fair Housing Suit Against Fannie Mae

SAN FRANCISCO (CN) – Fair housing advocates can move forward with claims that mortgage lender Fannie Mae systematically fails to maintain foreclosed properties in minority neighborhoods, a federal judge ruled Wednesday.

The National Fair Housing Alliance and 20 other groups brought a federal complaint two years ago against the Federal National Mortgage Association, or Fannie Mae, after a four-year investigation concluded that the 68-year-old government-sponsored financier of mortgage loans violates the Fair Housing Act by neglecting foreclosed properties in communities of color.

From July 2011 to October 2015, the alliance investigated 2,300 properties in 38 metropolitan areas, documenting with photos how Fannie Mae maintained its real estate owned, or REO, properties in predominantly white neighborhoods compared to those in communities of color.

The investigation found the average number of deficiencies among properties in minority neighborhoods was 7.2, 50 percent higher than the average 4.8 maintenance lapses found in predominantly white neighborhoods.

The survey also found 24 percent of properties in communities of color had 10 or more maintenance or marketing problems compared to 6 percent in white neighborhoods.

That disparity contributes to lower property values in minority neighborhoods and makes it harder for homeowners in those communities to move to integrated neighborhoods because they have less equity to use to buy a new home, according to the 117-page lawsuit.

Fannie Mae tried to have the lawsuit dismissed, saying the groups failed to plead facts sufficiently showing that its practices had a discriminatory impact.

U.S. District Judge Jeffrey White disagreed.

“At this procedural posture, the court finds that Plaintiffs have sufficiently alleged facts to support their theory that the policy of delegation of discretion or failure to supervise and differential maintenance based on the properties’ age and value as the robust cause of discriminatory impact,” he wrote, denying Fannie Mae’s motion to dismiss their Fair Housing Act claim.

White did dismiss the housing advocate’s disparate treatment claim with leave to amend, writing, “The court finds that the allegations as currently pled do not create an inference of discriminatory intent.”

Their lawyer, Stephen Dane of Relman, Dane, and Colfax in Washington, said they’ll likely try again with the disparate treatment claim.

“We are generally pleased with this decision, and what he identified as a deficiency in our pleading on the intent claim we’ll likely file our amended pleading to cure,” he said.

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