Series: Foreclosure Crisis How Banks and Government Fail Homeowners

Update 4/17: The National Fair Housing Alliance filed their complaint against U.S. Bank today, also for an alleged violation of the Fair Housing Act. Read the complaint.

Wells Fargo and U.S. Bank have let foreclosed homes in black and Latino neighborhoods lapse into disrepair, while bank-owned homes in mainly white neighborhoods are better cared-for, according to housing advocates.

The National Fair Housing Alliance, a non-profit group, brought a formal complaint to the Department of Housing and Urban Development last week alleging that Wells Fargo violated the Fair Housing Act by failing to keep up homes in minority neighborhoods. Today, the group announced they are also filing a second complaint, against U.S. Bank.

Earlier this month, the group released a survey, which was funded in part by HUD, of more than 1,000 unoccupied, foreclosed homes across the country owned by unspecified banks. When a house is foreclosed upon, the bank that takes it over is responsible for maintaining it. The report cites evidence — photos and interviews with neighbors — showing houses becoming dilapidated under banks' watch.

The complaint against Wells Fargo claims that among more than 200 homes surveyed, those in black and Latino neighborhoods were much more likely to have yards filled with trash, broken doors, damaged windows, and other signs of neglect. Fewer homes in those neighborhoods had "for sale" signs visible. For example, 68 out of 149 homes in black and Latino neighborhoods had damaged roofs, compared to only nine out of 69 properties in white neighborhoods.

The study looked at homes owned by Wells Fargo in Washington D.C., Baltimore, Philadelphia, Dallas, Miami, Atlanta, Oakland, Calif., and Dayton, Ohio.

A spokeswoman for Wells Fargo said in an emailed statement that the bank "conducts all lending-related activities in a fair and consistent manner without regard to race: this includes maintenance and marketing standards for all foreclosed properties for which we are responsible." She also said that the bank has a dedicated department that maintains and markets foreclosed properties from loans that are within its portfolio. Since the complaint did not identify specific properties, she said, Wells Fargo has not been able to investigate its claims.

U.S. Bank did not immediately respond to our request for comment, and a spokesman for HUD declined to comment on the complaint.

The report also pointed out that there were simply fewer bank-owned foreclosed properties in white neighborhoods than in minority neighborhoods, an indication, it says, of the fact that African-American and Latino communities were disproportionately affected by the subprime mortgage crisis.

Numerous studies have shown that lenders targeted minorities for the riskiest loans, and often charged them more than similarly qualified white borrowers. A report from the Center for Responsible Lending found that black and Latino homeowners were twice as likely to lose their homes to foreclosure than white homeowners. (The center was started with support from the Sandler Foundation, which is also the major funder of ProPublica.) In the biggest settlement to come out of the government post-bubble investigation of discriminatory lending practices, lender Countrywide (now owned by Bank of America) agreed to pay $335 million to settle a Department of Justice suit.

Nationally, banks or investors own roughly half a million foreclosed homes, and the Federal Reserve estimates this will increase to 1 million this year. Some banks and investors are looking to unload the properties en masse. Fannie Mae and Freddie Mac, who own about half the properties, are piloting a program for bulk sales of their foreclosed properties that requires they be offered as rentals. Other lenders are turning into landlords themselves.