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BofA faces discrimination complaint over REO upkeep

Industry defends the bank, saying repetitive crime makes maintenance a struggle

boarded up homes

An advocacy organization has Bank of America (BAC) in its crosshairs as it revamps a housing discrimination complaint filed a year ago in relation to the bank's property upkeep practices.

Yet, the amended complaint, which the National Fair Housing Alliance plans to refile with the U.S. Department of Housing and Urban Development, is considered to be a distraction from the real issues impacting these neighborhoods, industry experts say.

In fact, the industry is more likely to blame repetitive acts of vandalism and crime for issues surrounding the homes in question.

The issue posed by the advocacy group is the result of an investigation into how big banks are maintaining and marketing REO properties in minority neighborhoods.

The NFHA investigated bank-owned homes in major U.S. cities nationwide and alleged disparate treatment of REO properties. The group claims banks maintain and market foreclosed properties in white communities in a superior manner when compared to the handling of REOs in minority neighborhoods.

“In 2009, the National Fair Housing Alliance decided to look and see how banks were taking care of foreclosed properties,” said NFHA President Shanna Smith.

Arturo Alvarado, executive director of Denver Metro Fair Housing Center, claims homes in communities of color are more likely to have 10 or more deficiencies.

Alvarado described a number of properties that have broken windows and locks, overgrown weeds and unmaintained yards. He noted these REO properties, which are in predominantly minority neighborhoods, often don’t even have a for-sale sign in the front yard. “Can you imagine living next to this home for 3 years?” he asked.

But Auction.com Executive Vice President Rick Sharga said this type of 'discrimination' is likely a chicken-or-egg type of scenario.

"The root cause of the problem typically isn’t because the lender or owner of the property doesn’t want to keep the property up," said Sharga, who noted that properties in the neighborhoods described above are often harder to maintain.

"As soon as they’re repaired, they’re trashed again," he noted.

Sharga added that these properties, in suffering neighborhoods, are also likely to be left vacant for longer periods of time due to vandalism.

"Since the beginning of the foreclosure crisis, there has been a relatively high number of REO properties that haven’t been listed for sale," he added.

Often these properties are in such a bad state of repair that they are unsellable or the selling of these homes is made more difficult due to regulatory issues, such as Michigan’s Redemption Law, which keeps REO properties off the market for six months in hopes that the original owner can buy the property back.

If banks such as Bank of America don’t want to maintain these minority-neighborhood REO properties, added Sharga, then why wouldn’t they want to sell them? It is in the asset owner’s own financial interest to maintain properties — no matter where they are located — to the best of their abilities.

"I do believe the industry is colorblind," Sharga said.

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