Banks and other financial institutions have agreed to many multimillion and even multibillion dollar settlements following the financial crisis for their mortgage practices. This week, however, the banks scored a victory when allegations against U.S. Bank of racial discrimination in REO maintenance were dismissed by HUD.
Washington, D.C.-based non-profit National Fair Housing Alliance (NFHA) alleged in a complaint filed in 2012 that the Minneapolis-based bank was in violation of the Fair Housing Act of 1968 by failing to maintain REO properties in predominantly African-American and Hispanic neighborhoods as well as it was maintaining REO properties in predominantly white neighborhoods.
In its ruling following an investigation of the properties in question, HUD stated that the evidence did not show any difference in the bank’s treatment of the properties that was motivated by race or ethnicity. Instead, HUD concluded from its investigation of the 119 residential properties for which U.S. Bank serviced on behalf of the FHA that the bank was properly maintaining those properties.
In its 30-page report on the findings of its investigation, HUD concluded that “there is no reasonable cause to believe that Respondents engaged in a pattern or practice of discriminatory treatment as alleged, engaged in individual instances of discrimination as would be indicated by testing, or violated Sections 804 (a), (b), (c), or (d) of the Fair Housing Act.”
U.S. Bank spokesman Dana Ripley told DS News in an email that “we think the decision speaks for itself.” NFHA has stated that it plans to appeal HUD’s decision.
NFHA’s complaint against U.S. Bank “relies largely upon photographic evidence to demonstrate maintenance act-related discrimination,” according to HUD. In its ruling, however, HUD found that the photos did not provide the context for claims of racial discrimination in REO maintenance and did not alone prove discrimination, saying that “the photographs fail to demonstrate action or inaction by Respondents” with regard to property maintenance. HUD examined the average amount of money spent on property maintenance for the 119 properties and found that “there is no pattern of spending disparity between properties in white neighborhoods and minority neighborhoods” and that “spending varies dramatically based on the unique needs of any given property.”
HUD also ruled that U.S. Bank was not responsible for an additional 275 properties named in the complaint since the bank’s role in those properties was solely that of trustee.
NFHA filed similar complaints against Bank of America and Wells Fargo alleging racial discrimination in REO properties in 2012 along with the complaint against U.S. Bank. Wells Fargo settled in 2013 for $42 million, which provided millions of dollars in grants to NFHA and its affiliates. HUD is still investigating NFHA’s complaint against Bank of America.
In May 2015, NFHA filed a complaint with HUD against Fannie Mae following a five-year investigation that encompassed 34 cities and 2,100 REO properties owned by the government-sponsored enterprise. That complaint alleges that Fannie Mae was less diligent about maintaining REO properties in minority-dominated neighborhoods than in mostly white communities. The case is still pending.