Lawsuit: Deutsche Bank lets foreclosures in minority areas fall to disrepair, suppressing home values
by Scott Holland
Nearly 20 fair housing activist organizations are suing Deutsche Bank, alleging it worked to suppress property values in minority neighborhoods across the country by allowing foreclosed homes to fall into disrepair, while maintaining its holdings much better in predominantely white neighborhoods.
In a complaint filed Feb. 1 in federal court in Chicago, the private organizations said Deutsche Bank did less exterior maintenance and marketing of properties it acquired through foreclosure in predominantly minority neighborhoods in 30 metropolitan areas. In addition to Deutsche Bank, named defendants include Ocwen Financial Corp. and Altisource Portfolio Solutions, Inc., which do home preservation and maintenance work for bank-owned properties.
The housing groups say they investigated more than 1,100 foreclosed properties going back to 2011, collecting “evidence on 39 objective aspects of the routine exterior maintenance of each property investigated, and accumulated over 29,000 photographs of the pertinent conditions, such as unsecured doors, damage to steps, handrails, windows and fences, graffiti, the accumulation of trash and mail and overgrown grass and shrubbery.”
They also said they identified marketing deficiencies like an absence of “for sale” signs or current online listings while allowing “negative signage and warnings to deter prospective buyers” such as “bank-owned,” “auction” or “foreclosed.”
According to the complaint, there were “highly significant disparities in the routine exterior maintenance and marketing of the Deutsche Bank-owned homes in communities of color as compared to white communities.” The plaintiffs said it found in each of the 30 cities examples of bank-owned properties in markedly worse conditions in neighborhoods primarily occupied by African-American and Latino residents.
This approach perpetuated racial segregation, the complaint alleged, by denying housing opportunities, impeding neighborhood stabilization and economic recovery and lowering the value of other homes. They say taking care of properties differently based on the racial makeup of their neighborhood violates the Fair Housing Act, and further that it affects the organizations’ “missions by perpetuating the unlawful discrimination and segregation they use their limited resources to dismantle.”
Plaintiff organizations include the National Fair Housing Alliance, Hope Fair Housing Center, South Suburban Hosing Center, Housing Opportunities Made Equal of Virginia, Fair Housing Opportunities of Northwest Ohio, Fair Housing Continuum, Greater New Orleans Fair Housing Action Center, Denver Metro Fair Housing Center, Metropolitan Milwaukee Fair Housing Council, Fair Housing Center of West Michigan, Miami Valley Fair Housing Center, Housing Research and Advocacy Center, Fair Housing Center of the Greater Palm Beaches, Fair Housing Center of Central Indiana, Central Ohio Fair Housing Association, Housing Opportunities Project for Excellence, Connecticut Fair Housing Center, North Texas Fair Housing Center and Fair Housing Advocates of Northern California.
According to the complaint, the organizations filed an administrative housing discrimination complaint with the U.S. Department of Housing and Urban Development’s Fair House and Equal Opportunity Office on Feb. 26, 2014, and amended it six times through July 26, 2017, as its investigation continued. That complaint is pending.
They also said Ocwen and Altisource have “histories of regulatory violations, allegations of unlawful corporate conduct and intentional bad acts, requiring the payment of millions of dollars to resolve claims that they have intentionally violated consumer finance, civil rights and securities laws, and defrauded borrowers with respect to their mortgage loans.”
In addition to a jury trial, the organizations want a court to declare Deutsche Bank’s conduct in violation of FHA regulations and to force it to stop treating properties differently based on neighborhood demographics. They seek unspecified compensatory and punitive damages.
The housing organizations are represented by Soule, Bradtke & Lambert, of Elmhurst; Relman, Dane & Colfax PLLC, of Washington, D.C.; and the National Fair Housing Alliance, also of Washington, D.C.