Facts

The Federal National Mortgage Association (Fannie Mae) is in the business of purchasing and guaranteeing home mortgages and is chartered by the U.S. Congress to promote access to residential mortgage credit throughout the nation. The National Fair Housing Alliance (NFHA) is a private fair housing organization committed to ending housing discrimination and promoting residential integration in their communities and around the nation. Between July 2011 and October 2015, the NFHA, alongside multiple nonprofit housing organizations across the nation, conducted an investigation of Fannie Mae's real estate activities in communities of color, and predominately white neighborhoods in 38 metropolitan areas throughout the United States. The stated purpose of the investigation was to determine if Fannie Mae was discriminating based on the predominant race or national origin of the residents of neighborhoods in the routine maintenance of dwellings it came to own after foreclosures. A dwelling owned by Fannie Mae after a foreclosure is referred to as a "Real Estate Owned" or "REO" dwelling. Once a dwelling becomes an REO property, Fannie Mae assumes all duties and responsibilities of ownership, including ordinary maintenance, while it markets the dwelling for sale to the general public. The stated mission of the Fannie Mae property maintenance team is to ensure the quality of its REO property maintenance services to produce the best-in-class, market-ready properties and maintain them until removal from its inventory. Fannie Mae's routine exterior maintenance of REO dwellings includes, among other things, regular mowing, removing trash and debris, eliminating overgrown grass and shrubbery, and securing or replacing loose handrails and steps. Over the course of four years, the housing organizations investigated over 2,300 properties owned and maintained by Fannie Mae, collected evidence on over 35 aspects of the maintenance of each property investigated, and accumulated over 49,000 photographs. Subsequently, the housing organizations filed a complaint against Fannie Mae under the Fair Housing Act (FHA) to challenge Fannie Mae's maintenance of its REO dwellings.

PLAINTIFFS' CONTENTIONS: Plaintiffs contended that defendant is required, under the FHA, to maintain all REO properties, regardless of their location, without regard to race, color, religion sex, handicap, familial status, or national origin. Plaintiffs compared the quality of maintenance in properties located in a metropolitan area's communities of color with the quality of maintenance in properties located in the same metropolitan area's predominantly white neighborhoods, and plaintiffs' investigation demonstrated that defendant had failed to conduct routine exterior maintenance and marketing of REO properties in communities of color, thereby leaving those REOs in a state of neglect, while satisfactorily conducting routine exterior maintenance and marketing of its REO properties in predominantly white neighborhoods, thereby leaving those REO's in a materially better condition. Plaintiffs alleged that the disparity between defendant's treatment of REO properties in communities of color and predominantly white neighborhoods can only be explained by race, and that defendant's racially discriminatory treatment of REO properties is prevalent throughout the country. Plaintiffs also argued that there were no valid business purposes served by, or valid excuses for, defendant's differing maintenance of REO properties based on neighborhood composition. Plaintiffs further contended that the proper maintenance of REO dwellings is vital to the stability of neighborhoods and to the economic, social, and physical well-being of their residents, and REO properties that are poorly maintained have significant, negative outcomes to a neighborhood, affecting the health and safety of surrounding residents. Plaintiffs claimed that defendant's poor maintenance of REO properties interfere with the rights of homeowners in communities of color to exercise the right to enjoy their homes in a manner free from discrimination, and stigmatizes communities of color as less desirable than predominantly white neighborhoods.

DEFENDANT'S CONTENTIONS: Defendant denied all contentions.

Result

The case settled for $53,000,000. Pursuant to the agreement, defendant made several enhancements to its REO maintenance and marketing activities. Plaintiffs will use $35,390,000 of the settlement amount to address community needs, including addressing home ownership, neighborhood and/or community stabilization, access to credit, property rehabilitation, residential development in African American and Latino Communities, fair housing education and outreach, counseling, and other fair housing activities.