Bank of America Hit by Another Discrimination ... - AOL Real Estate

The vacant property next door to Chicago resident Mae Campbell has cast a pall over her neighborhood of Austin for more than five years. The home, which she said was owned by Bank of America until very recently, has overgrown grass, water damage and boarded-up windows.

"We bought locks to chain it up to keep squatters out," Campbell said, referring to her and her neighbors' efforts to secure the home. "All of the pipe and wiring was taken out [by looters], all of the plumbing."

Campbell, who is black, lives in a minority neighborhood, and her tale of troubles with Bank of America-owned properties that have fallen into disrepair typifies a much wider problem facing minority communities across the country, according to the National Fair Housing Alliance.

The NFHA announced Tuesday that it has filed a third complaint with the Department of Housing and Urban Development against Bank of America, charging that the bank neglects its properties in minority neighborhoods while paying special attention to maintaining its homes in predominantly white neighborhoods.

The group's new complaint amends a previous one to add Chicago, Milwaukee and Indianapolis to a list of areas where the bank has allegedly discriminated against minorities through its management of bank-owned properties (an example one such home is pictured above). Two previous complaints identified California, Michigan, the East Coast, Orlando, Fla., and Charleston, S.C., as places with disparities in the way BofA maintained its foreclosures.

"Bank of America has an obligation -- a duty under federal law -- not to discriminate," Peter Romer-Friedman, counsel to the National Fair Housing Alliance, said at a press conference Tuesday. "Unfortunately, our investigation has revealed Bank of America has woefully failed to take care of its fair housing obligations ... when it comes to the maintenance and marketing of REO properties."

Bank of America did not respond to a request for comment.

The NFHA's amended complaint further expands an even wider anti-discrimination campaign that the group is waging against other major mortgage lenders, including Wells Fargo and U.S. Bank.

'The Banks Are Back -- Our Neighborhoods Are Not'

NFHA's allegations stem from an investigation that found that bank-owned homes (also known as real estate owned properties or REOs) in minority communities were much more likely to have maintenance or marketing deficiencies, such as broken windows, water damage, unkempt lawns and no for-sale signs.

"REO properties in communities of color generally appeared vacant, abandoned, blighted and unappealing to real estate agents who might market the unit to homebuyers," according to the NFHA report on the investigation, titled "The Banks Are Back -- Our Neighborhoods Are Not." "On the other hand, REOs in white communities generally appeared inhabited, well-maintained and attractive to real estate agents and homebuyers."

In Chicago, an REO in a minority neighborhood is twice as likely to have trash on its lawn, twice as likely to have dead grass on more than 50 percent of its lot, nearly five times as likely to have damaged steps or handrails, and 12 times as likely to have damaged windows, according to Anne Houghtaling, executive director of the HOPE Fair Housing Center, which participated in the NFHA investigation.

On top of that, 80 percent of REOs in those neighborhoods also did not have for-sale signs, making it harder for them to attract possible buyers, she said.

It's easy to identify an REO in a minority neighborhood because "from a block away, you see the trash," Houghtaling said. "In the white communities, the only way you might know [that the home is a foreclosed property] is when you see a for-sale sign."

Much More Than Just an Eyesore

Campbell is well aware of how such neglect can drag down a neighborhood. She said that the property next to hers isn't just an eyesore, it has also damaged the value of her home and caused her homeowner's insurance to rise.

A report released Wednesday by the Center for Responsible Lending underscored the unfair penalty homeowners like Campbell pay for living next to foreclosures.

The study found that foreclosures' negative effect on neighboring homes' property values disproportionately impacts minorities. Minority-owned homes have lost $1 trillion in value since 2007 due to neighboring foreclosures, the report found, half of the total property value lost to such "foreclosure spillover costs."

Campbell said that she tried to purchase the home, but Bank of America never responded to her offer. Just two weeks ago, the home, which has not had a for-sale sign in the yard for years, sold to an investor, she said. And she said the same thing happened to another REO next door to her, selling for just $6,000.

"I, as a person that lived in the community, was denied the right to purchase it," she said. "I got nothing but the runaround."

And investors snapping up foreclosures is not always a good thing.

"Investors don't necessarily care about neighborhood vitality. A person who lives next door is more likely to care," Douglas Robinson, a spokesperson for NeighborWorks America, told AOL Real Estate. NeighborWorks rehabs foreclosures and then sells or rents them to low-income Americans.

Banks' failure to adequately market REOs makes it more likely that investors, who are more attractive buyers to banks because they pay cash, will purchase them at steep discounts.

"[Purchasing a foreclosure] takes wealth that was built up over generations" for minorities, said NFHA president Shanna L. Smith at Tuesday's news conference, "and redistributes it to investment firms."

An Expanding Campaign

The NFHA filed similar complaints against U.S. Bank and Wells Fargo before targeting Bank of America, partly because Bank of America had first initiated discussions with the NFHA aimed at heading off the possibility of a lawsuit.

But "Bank of America did not step up to the plate ... in maintaining and marketing REO properties," an NFHA spokesperson told AOL Real Estate. "When discussions break down, we take action."

The NFHA said that, to settle the complaints, banks must end their discriminatory management of REOs, provide relief to minority communities impacted by REOs and compensate the NFHA for their investigation.

See also:
Vacant Homes Plague Neighbors as Lenders Drag Feet
RealtyTrac Election Housing Report Finds Housing Market Worse Off than in 2008
Loan Officer Lifts the Lid on Deceptive Lending in 'The Liar and His Loans'

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Source: http://realestate.aol.com/blog/2012/10/24/bank-of-america-discrimination-complaint-foreclosures/

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