One step in the right direction: Wells Fargo settles historic housing discrimination complaint
OPINION - Wells Fargo’s willingness to resolve this problem is laudable. They recognized a problem and worked with advocates to solve it...
“Somebody has got to go to jail!” exclaimed Stephen Lerner. Stephen and I were conferring off air during my wife, Melissa Harris-Perry’s MSNBC show.
When the director yelled “go”and the cameras clicked on, Lerner did not let up. He explained how peaceful protestors, some of them grandmothers, all affected by the foreclosure crisis, were arrested during a peaceful sit in, all while mortgage company executives faced no criminal prosecution even after causing the foreclosure crisis that wrecked the United States economy.
Well, Stephen, this one is for you. Now, to be clear, it is not exactly what we yearned for. There is no criminal prosecution here. But it is momentous progress in the fight to rebuild wealth in communities disenfranchised by the foreclosure crisis.
The National Fair Housing Alliance (whose board I serve on), the United States Department of Housing and Urban Development and 13 local fair housing non-profits (one of which I run) settled a more than $40 million dollar historic housing discrimination complaint against Wells Fargo.
It turns out that after playing its role in making unscrupulous loans that caused the foreclosure crisis, Wells Fargo is alleged to have exacerbated the effect of foreclosures in minority communities. Allegedly, Wells Fargo took ownership of foreclosed properties, commonly referred to as Real Estate Owned properties or REOs, and failed to properly maintain the properties in minority neighborhoods all while providing reasonable maintenance and care to properties in majority white neighborhoods.
The complaint alleged that a whopping 67 percent of properties in black and Latino neighborhoods had maintenance deficiencies. Allegedly, Wells Fargo REOs in black and Latino neighborhoods were more likely to have:
- Substantial amounts of trash
- Dead grass
- Broken doors or locks
- Damaged windows
- Damaged roofs
- Holes in the structure
- Lack a for sale sign
- Peeling and chipped paint
- Damaged siding
- Missing or out of place gutters, and
- Water damage
For the black and Latino homeowners in the 19 affected cities, the REOs maintenance problem is a double whammy. Here’s how. Cementing middle class status in the United States has everything to do with accumulation of wealth. And for many families, wealth accumulation is synonymous with home ownership. A Pew Study found that in 2005, home equity made up nearly two-thirds of the net worth of Hispanics and 59 percent for blacks, but only 44 percent of whites. So it is no surprise that the home foreclosure driven 2007 Great Recession that swiped $16.4 trillion of wealth from American families, had a worse effect on black and Latino households. Thus, whammy number one: black, Latino and Asian families lost 60 percent of their net wealth during the recession, while white household wealth fell by only 23 percent.
To be clear, minority families most harmed by the recession lost their homes via foreclosure when they could not maintain payments on predatory and sub-prime loans. But let’s turn our attention to the families who did not lose their homes. These families were able to maintain their loan payments and avoid foreclosure. But many were in neighborhoods that have suffered under the pressure of massive numbers of foreclosures. And the National Fair Housing Alliance contends that foreclosed properties – REOs – owned by Wells Fargo, Bank of America and US Bank were not properly maintained, unlike REOs in majority white communities.
The underlying problem is that properties values in the affected neighborhoods were likely dragged down by REOs in disrepair. No one wants to purchase a home, let alone live in a neighborhood spattered with vacant properties suffering water damage, roof and mold damage, broken glass or unkept yards. Thus, whammy number two: black and Latino families who were able to keep their homes and survive the foreclosure crisis frequently still saw a loss in wealth when their homes lost value because lenders failed to properly maintain vacant foreclosed properties in their neighborhoods.
Wells Fargo’s willingness to resolve this problem is laudable. They recognized a problem and worked with advocates to solve it. Regrettably, their counterparts at Bank of America and US Bank have yet to take similar progressive steps.
Some have argued that because home sales are on the upswing, the American economy is back and the crisis is over. But the Wells Fargo settlement along with data showing net wealth loses in minority communities makes clear that the crisis is not over yet. Hopefully other lenders will step up and take steps to repair the national economy by properly tending to REOs.
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