Mortgage giant Fannie Mae agreed to pay $53 million to settle a lawsuit with fair-housing advocates who had accused the government-sponsored company of neglecting foreclosed homes it owned in minority neighborhoods after the 2008 mortgage crisis.
The plaintiffs, the National Fair Housing Alliance and 20 other fair housing groups, will use over $35 million of the funds to promote homeownership, access to credit, and other initiatives in Dallas, Chicago, San Diego, and more than 30 other metropolitan areas identified in the suit, the groups announced Monday. These will include grants for down-payment assistance and home renovations.
The 2016 lawsuit accused Fannie Mae of maintaining and marketing properties it owned after foreclosure differently depending on the predominant race of the neighborhood those homes were in. For example, the mortgage giant was more apt to overlook broken or unsecured doors and windows or allow properties to be littered with visible garbage at homes it owned in majority-Black and Latino communities, the lawsuit said. Fannie Mae denied any wrongdoing or liability in the settlement.
“Discrimination has led to diminished value of homes in Black neighborhoods and other communities of color,” William Tisdale, president and CEO of plaintiff Metropolitan Milwaukee Fair Housing Council, said in a statement. “Because a family’s home is often its greatest asset, unfair practices drive growth of the racial wealth gap.”
Since home ownership is an important source of wealth, longstanding disparities in the rate of homeownership and property valuation have been major drivers of the racial wealth gap. What’s more, after the mortgage crisis, homes in Black and Latino neighborhoods were at least twice as likely to be foreclosed on, according to Zillow.
Fannie Mae is one of the two government-sponsored enterprises (the other being Freddie Mac) that supports home loan financial markets by buying mortgages from lenders. Like other lenders, it takes ownership of homes when the mortgage borrowers can’t meet their obligations and must foreclose. It then puts them up for sale on its HomePath website.
A Fannie Mae spokesperson said the settlement lets Fannie Mae and the National Fair Housing Alliance “move forward and work together on important housing equity issues.”
“We require the same property maintenance standards in all neighborhoods regardless of race or ethnic background, and conduct independent third-party quality control reviews of vendors hired to do this work,” the spokesperson said.
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