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Servicing

Fannie Mae contractor Cyprexx accused of racial discrimination

Homes in African American, Latino neighborhoods were treated “very poorly”

REO bank owned

The National Fair Housing Alliance, Housing Opportunities Made Equal, and Fair Housing Continuum filed a discrimination complaint with the Department of Housing and Urban Development, alleging that Cyprexx Services failed to properly maintain real estate owned properties in African American and Latino neighborhoods in Baltimore, Maryland; Kansas City, Missouri; Orlando, Florida; and Richmond, Virginia.

A Cyprexx source said the company was not made aware of any complaints and the NFHA, to his knowledge, never reached out. And this is not the first time the NFHA decided to take aim at a field service provider.

The NFHA typically uses this type of shoot-first tactic. When asked whether Cyprexx was notified of the investigation prior to the complaint being filed, the NFHA said it does not contact the subjects of its investigations.

"We have contacted Fannie Mae about these types of issues in the past," said Shanna Smith, president and CEO of the National Fair Housing Alliance. "We expected Fannie to contact their vendors to address these issues. We expect Cyprexx knew about this. We are taking administrative action to remedy these issues as quickly as possible."

 

The alliance, in the past, also targeted big lenders, such as Bank of America, as well as online real estate market places, such as Zillow and Trulia.

Today it is Cyprexx's turn.

The consortium of housing advocacy groups surveyed nearly 175 properties in the four cities and found that the Fannie Mae-owned properties in minority neighborhoods were in much worse condition than those in predominantly white neighborhoods.

“Fannie Mae is allowing its contractors to treat homes in communities of color very poorly,” Smith said. “Cyprexx is required by federal law to maintain foreclosures without regard to the racial makeup of the neighborhood, but the evidence we uncovered flies in the face of that obligation. Unfortunately, this complaint addresses merely the latest in long pattern of discrimination by Fannie and its contractors.”

Failing to maintain homes based on the racial or ethnic composition of a neighborhood is a violation of the federal Fair Housing Act and has a toxic effect on the health and livelihood of entire communities, the NFHA said in a statement.

“Cyprexx has a duty to take care of these properties,” Smith said. “They’re being paid by Fannie Mae to take care of these properties. Imagine just trying to show this home to a buyer.”

Cyprexx provides property preservation services for Fannie and it is tasked with performing eight maintenance issues to keep the properties in good condition. Those eight issues are: accumulation of trash or debris, overgrown grass or leaves, overgrown or dead shrubbery, invasive plants, unsecured or broken windows, unsecured or broken doors, unsecured holes in the structure, and broken or missing steps and handrails.

According to the NFHA, its investigators visited Fannie-owned properties listed Fannie’s Homepath website and recorded whether the properties were deficient in any of the eight categories or not.

In Baltimore, for example, 75% of the 20 properties surveyed in African-American neighborhoods had three or more deficiencies. Only one property in a white community had three or more deficiencies.

Thirty percent of the homes in African-American neighborhoods had five or more deficiencies. Additionally, 80% of the homes in African-American neighborhoods had overgrown or dead shrubbery. According to the investigation, none of the homes in white neighborhoods were affected by the same issue.

In Richmond, 36.4% of the 18 homes surveyed in communities of color had three or more deficiencies. No property in a white community had more than three deficiencies.

The NHFA highlighted on house in Kansas City that was in disrepair. Investigators suspected that the house may have been overrun by cats after seeing a cat enter a hole in the home’s roof and hearing cats inside the home.

According to the NFHA, the average list price for a home in that neighborhood is $47,000. The Fannie-owned home recently sold for $1.

In Orlando, investigators from the Fair Housing Continuum found a decomposing rat carcass in one home.

“Fannie Mae and Cyprexx are not doing anything about it,” said David Baade, president and CEO of the Fair Housing Continuum. “So we’re doing something about it.”

This marks the second time in three months that the National Fair Housing Alliance has charged a property preservation firm with discriminatory practices. In April, the group levied charges against Safeguard Properties, accusing the company of providing higher levels of property preservation services in predominantly white neighborhoods than properties in largely African American and Latino neighborhoods.

According to the NFHA, “the Miami Valley Fair Housing Center in Dayton, Ohio, the Toledo Fair Housing Center, and the Greater New Orleans Fair Housing Action Center described their findings in Dayton, Toledo, Baton Rouge, New Orleans and Memphis. In all cities, the groups found significant amounts of trash, overgrown invasive plants, and unsecured holes in the building structures of homes in communities of color, while rarely finding the same problems in White neighborhoods.”

In the case against Cyprexx, the NFHA highlighted the maintenance issues by city:

Baltimore:

75% of REO properties serviced by Cyprexx in communities of color had 3 or more deficiencies, while only 17% of REO properties in White communities had more than 3 deficiencies documented.

33% of REO properties serviced by Cyprexx in predominantly White communities had zero deficiencies, while no REO property in a community of color had zero deficiencies.

30% of REO properties serviced by Cyprexx in communities of color had 5 or more deficiencies, while no REO property in a White community had 5 or more deficiencies.

Kansas City:

63% of REO properties serviced by Cyprexx in predominantly White communities had zero deficiencies, while only 33.3% of the REO properties in communities of color similarly lacked deficiencies.

23% of REO properties serviced by Cyprexx in communities of color had 3 or more deficiencies, while no REO property in a White community had more than 3 deficiencies documented. 

Orlando:

39% of REO properties serviced by Cyprexx in predominantly White communities had zero deficiencies, while only 14% of REO properties in communities of color similarly lacked deficiencies.

40% of REO properties serviced by Cyprexx in communities of color had 3 or more deficiencies, while only 15% of REO properties in White communities had more than 3 deficiencies documented.

9% of REO properties serviced by Cyprexx in communities of color had 5 or more deficiencies, while no REO property in a White community had the same deficiency amount.

Richmond:

61% of REO properties serviced by Cyprexx in predominantly White communities had zero deficiencies, while only 23% of REO properties in communities of color similarly lacked zero deficiencies.

36% of REO properties serviced by Cyprexx in communities of color had 3 or more deficiencies, while no REO property in a White community had more than 3 deficiencies documented.

{CORRECTION: A previous version of this article referred to the Fannie Mae Homepath for Short Sales website as the source for the homes investigated by the National Fair Housing Alliance. The website used by the NFHA was Fannie Mae Homepath.}

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