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Lawsuit: Bank cares for foreclosed homes based on racial makeup of neighborhoods

Posted at 7:28 AM, Feb 26, 2018
and last updated 2018-02-26 09:49:29-05

KANSAS CITY, Mo. - A federal lawsuit claims a bank and property management companies are making decisions along racial lines that negatively impact neighborhoods across Kansas City.

A watchdog group called the National Fair Housing Alliance filed a lawsuit against Deutsche Bank, Ocwen Financial and Altisource for discrimination.

The NFHA said the organizations take better care of foreclosed homes they own and manage in predominantly white neighborhoods, compared to foreclosed homes in predominantly black or Hispanic neighborhoods. 

The NFHA found homes in minority neighborhoods with broken windows, overgrown yards and other signs of blight. Homes in white neighborhoods had far fewer deficiencies, according to the NFHA. 

That blight unfairly hurts property values and creates crime and vandalism in minority neighborhoods, not white neighborhoods, the lawsuit claims. 

Ocwen and Altisource denied the claim. Deutsche Bank did not reply to a request for comment. 

Senior Real Estate Broker Associate Charles Wilson with Reece and Nichols has worked in Kansas City for more than three decades. He said he has seen evidence of this claim. 

"Overall it's not as bad as perhaps other cities, but it is prevalent," Wilson said.

He added that there are ways to address the issue. The first is for code enforcement offices in the municipality where a foreclosed home is located to hold banks more responsible for fixing problems. 

Wilson said banks and foreclosure entities would benefit by taking better care of their properties. 

"The properties that are blighted — it's harder for them to sell because usually only an investor would buy them, which the bank gets less money. It would behoove them to maintain properties. They would have a larger audience of buyers and nine times out of 10, they would get more money for the properties," Wilson said. 

Another solution in Wilson's eyes is for banks to allow someone to live in foreclosed homes under an agreement they maintain the property. 

"That way it reduces vandalism. These people, especially in lower economic situations, have a place to stay; they are not out in the street, if you will. They'll maintain the property, or there's an agreement the property will be maintained and that maintenance be monitored by the foreclosed entity," Wilson explained.

Kansas City is one of 30 metropolitan areas listed in the lawsuit. The case is scheduled for a hearing in federal court next month. 

An Altisource spokesperson provided 41 Action News with a similar case in which the U.S. Department of Housing and Urban Development dismissed similar claims the NFHA brought before a different organization.

The full statement from Altisource reads:

"The assertions made by the National Fair Housing Alliance (“NFHA”) have no merit.  The NFHA research, relied on as the basis of its claims, was previously discredited in 2016 by the U.S. Department of Housing and Urban Development in connection with another claim against a large U.S. bank. Altisource is a property preservation vendor operating on behalf of institutions that service mortgages and foreclosed homes. The NFHA assertions misrepresent both Altisource’s conduct and our role as a property preservation vendor.  

Altisource is committed to the principles of fair housing and neighborhood stabilization. We provide services according to client-approved policies and processes, applied without regard to the racial composition of a neighborhood and supported by industry best practices of quality assurance. We believe NFHA is acting irresponsibly and using misleading and inaccurate information."

Ocwen Financial spokesperson John Lovallo released the following statement in response to the lawsuit: 

"We strongly deny the National Fair Housing Alliance’s allegations, and believe they lack credible evidence and have no merit.  The company will vigorously defend itself against these allegations. Ocwen cares about communities, and is committed to equal maintenance and marketing of bank-owned homes no matter where they are located in the U.S.  We believe we have in place the necessary quality control standards designed to ensure that all properties are handled consistently regardless of their location. NFHA has previously made these same allegations against numerous other institutions in other complaints.”