Federal Court Gives the Green Light to Fair Housing Discrimination Claims Against Major Financial Services Companies

In a victory for Black and Latino neighborhoods in 30 cities, Court allows disparate impact and intentional discrimination challenges against Deutsche Bank Trust companies, Altisource and Ocwen to move forward  

In a victory for fair housing advocates, a federal judge largely denied Deutsche Bank Trust companies’, Altisource’s, and Ocwen’s motion to dismiss a lawsuit concerning discrimination against communities of color.

The court allowed the National Fair Housing Alliance (NFHA), the Fair Housing Center of the Greater Palm Beaches (FHC) and 18 other fair housing organizations to proceed with their disparate impact and intentional discrimination claims against the financial giants. The fair housing groups allege in their lawsuit that the financial companies failed to maintain foreclosed bank-owned (also known as Real Estate Owned or “REO”) properties in Black and Latino neighborhoods in 30 metropolitan areas throughout the country.

In allowing the cases to go forward, the Court noted that “there is a ‘clear, direct and immediate’ path between Defendants’ alleged discriminatory lack of maintenance and Plaintiffs’ response to that lack of maintenance through investigations, reporting, and advocacy.” The Court also recognized the plaintiffs had to “incur more costs responding to this problem than they otherwise would have” due to Deutsche Bank Trust companies’, Altisource’s, and Ocwen’s allegedly discriminatory conduct which “left more REO properties in minority neighborhoods in disrepair.”

“This is a major step in the FHC’s and  it’s allies fight to stop, counteract and bring to justice unscrupulous companies who harm our communities. These deliberate and despicable practices of housing discrimination will not be tolerated in Palm Beach County, the State of Florida and throughout our nation” stated Vince Larkins, FHC President & CEO. “We will continue to fight on in this case and others like it until victory is fully achieved for all communities affected  and they are made fully whole” he further stated.

“This is an important victory for the residents of Black and Latino neighborhoods in cities across the country. The investigation we conducted clearly shows that Deutsche Bank Trust companies and other financial giants have policies that result in disparate outcomes based on the racial composition of the neighborhood. It also demonstrates a pattern of intentional discrimination because of the willful neglect of bank-owned houses in communities of color. We’re pleased the Court has allowed the case to proceed and look forward to making our case in court” said Lisa Rice, President, and CEO, National Fair Housing Alliance. “It’s also important to note that the Trump administration is trying to make it much harder to bring disparate impact challenges through HUD’s administrative complaint process. This long-standing bedrock legal principle has been sanctioned by the Supreme Court and is one of our most powerful weapons to challenge insidious discrimination, and we cannot lose it.”

NFHA and its partners collected evidence at each inspected Deutsche Trust REO property using over 35 data points related to maintaining and securing the homes. The lawsuit asserts that Deutsche Trust-owned homes in predominantly white working- and middle-class neighborhoods are far more likely to have the lawns mowed and edged regularly, invasive weeds and vines removed, windows and doors secured or repaired, litter, debris and trash removed, and leaves raked. Based on evidence involving nearly 30,000 photographs of Deutsche Trust properties, it is alleged that the bank-owned homes in communities of color were much more likely to have overgrown or dead shrubbery, overgrown lawns, broken mailboxes, damaged steps or handrails, open holes in the structure, and broken windows among other eyesores.

In this case, the Plaintiffs allege that the financial institutions’ policy of “abdication” – whereby the Deutsche Bank Trust Companies relinquished and outsourced the responsibility for maintaining the REO properties to servicers without sufficient oversight – caused a disparate impact. The Plaintiffs also asserted that the Defendants adopted a low/high property value policy in which properties located in communities that the defendants deemed to be higher valued received better maintenance and care. Neighborhoods the Defendants designated as higher value were more often predominately white neighborhoods.

The fair housing groups alleged that communities of color were called “hot zones” meaning they were deemed to be more undesirable neighborhoods. With regard to claims of intentional discrimination, the Court stated that” [r]acially charged codewords may provide evidence of discriminatory intent by sending a clear message and carrying the distinct tone of racial motivations and implications” and that the low/high property value policy, if found to be true, maybe problematic.  This type of policy could constitute disparate impact and the judge found that the fair housing groups had properly pled a case of disparate impact against all of the named financial institutions.

The Court also noted that the “Plaintiffs have plausibly alleged that the effect of Defendants’ poor maintenance of REO properties in minority communities had the effect of perpetuating segregation.”
This decision by Judge Harry Leinenweber of the Northern District of Illinois Eastern Division makes the third time in recent months a U.S. district court has acknowledged the viability of both disparate impact and differing treatment (intentional discrimination)  claims regarding the use of fair housing laws to address disparities in the maintenance of REOs. In July 2019, a Maryland federal court upheld the plaintiffs’ ability to bring these types of claims against Bank of America and in August 2019 a California federal court upheld the plaintiffs’ ability to bring similar claims against Fannie Mae. 

The plaintiffs are represented by noted civil rights firms Soule, Bradtke & Lambert and Relman, Dane and Colfax, PLLC.

Click here to read the judges decision.

Click here to read the Complaint.

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FHC AND CITY OF BOYNTON BEACH SETTLE ALLEGATIONS THAT MORATORIUM DISCRIMINATED AGAINST PEOPLE WITH DISABILITIES

The Fair Housing Center of the Greater Palm Beaches, Inc. (FHC) and Dr. Love Predelus have reached a Conciliation Agreement with the City of Boynton resolving a HUD complaint that the City’s moratorium discriminated based on disability.

The agreement is the result of a FHC complaint filed on March 29, 2017 with the United States Department of Housing and Urban Development (HUD) alleging that the City violated the Fair Housing Act, Section 504 of the Rehabilitation Act, and the Americans with Disabilities Act, through instituting a six-month long moratorium on group home permitting in the City. The moratorium included homes that serve persons with disabilities. In addition, the FHC alleged that the actions taken by the City violated, interfered with, and frustrated the FHC’s ability to foster and promote equal housing opportunities and eliminate unlawful discriminatory housing practices.

As part of FHC’s efforts to counteract and deter what it alleged in the HUD complaint the FHC identified an additional complainant. On June 21, 2017, Dr. Predelus, owner of Summers Rain Assisted Living Facility, filed a complaint with HUD alleging that due to the moratorium on group home permitting, the City violated the Fair Housing Act, Section 504, and the ADA by delaying her ability to open up a group home serving persons with disabilities (which included veterans) in the City of Boynton Beach.

The City of Boynton Beach denied all allegations and in the interest of cooperation and collaboration the FHC, Dr. Predelus and the City of Boynton Beach have agreed to settle the claims in the underlying actions by entering into this Conciliation and Voluntary Compliance Agreement (Agreement).

Under the terms of the Conciliation Agreement, if the City intends to implement any ordinances or resolutions that relate to group homes for persons with disabilities, the City will to notify the public in its usual course, as well as FHC, of any such proposed legislative action, and meaningfully consider any responsive comments, including by FHC, received prior to enactment of any such ordinance or resolution. In addition, the City will facilitate a training and also distribute a copy of the Agreement to all City officials, staff, including elected, appointed, and/or hired positions and upon request, the public.

The FHC will work in partnership with the City by providing training, additional Fair Housing information and updates, apart from other existing partnerships the City has regarding Fair Housing Education and it’s HUD mandated obligations to Affirmatively Further Fair Housing within the City of Boynton Beach.

Group homes serve a very important role in this nation by assisting individuals with a wide rage of disabilities, such as chronic mental disorders that impair one’s ability to live independently. In addition, groups homes are crucial in assisting veterans, spousal abuse victims, those with drug and alcohol additions and helps fight homelessness.

Municipalities receiving federal funds must fully comply with the Fair Housing Act, as amended in 1988, 42 U.S.C. 3601 et seq., Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. 794, and Title II of the Americans with Disabilities Act of 1990, 42 U.S.C. 12131 et seq. in all programs.  Failure to do so could result in the lost of much needed funding for the community.

“We commend the City of Boynton Beach for stepping to the table in a pro-active manner to resolve this matter and the FHC looks forward to working with them in the future”, stated Vince Larkins, FHC President and CEO.

HUD Charges Florida Company, Couple, with Discriminating Against Hispanic Homeowners

WASHINGTON – The radio and television commercials seemed too good to be true; promising Hispanic homeowners to cut their mortgage payments in half, even offering $500 gift cards to entice them to sign up for loan modification assistance. But it was too good to be true, and today the U.S. Department of Housing and Urban Development (HUD) is charging a Florida company and its owners with housing discrimination for intentionally targeting Hispanic homeowners in a predatory mortgage modification scheme that increased, rather than decreased, their risk of foreclosure. Read HUD’s charge.

The Fair Housing Act prohibits discrimination because of national origin in housing and housing related services, including home mortgage and loan modification services.  This includes targeting persons because of their national origin for fraudulent modification services.

HUD claims that Advocate Law Groups of Florida, P.A., Jon B. Lindeman, Jr., and Ephigenia K. Lindeman violated the Fair Housing Act by intentionally targeting Hispanic families through a deceptive advertising campaign that aired on Spanish-language radio and television stations throughout Florida.

“As we peeled back the facts of this case, we were stunned by a business model built to target Hispanic homeowners,” said Anna María Farías, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity.  “HUD will use the full weight of the law to protect families from those who would prey upon them because of where they come from or what language they speak.”

HUD’s charge, filed on behalf of three Orlando-area Hispanic families, alleges that at initial client meetings, Spanish-speaking ALG employees made false promises to entice families into paying significant upfront fees and to sign contracts that were predominantly, if not entirely, written in English.  After being retained, ALG knowingly placed their clients’ homes at imminent risk of foreclosure by instructing homeowners to stop making mortgage payments and to cease communicating with their mortgage lenders or servicers.

In addition, HUD’s charge alleges that ALG neglected their clients’ cases and ignored bank requests for information. When homeowners complained about their mistreatment, ALG threatened them with increased mortgage payments, fines, or foreclosure if they sought to terminate their relationship.  ALG ultimately failed to obtain favorable mortgage modifications for their clients, while charging them thousands of dollars in up-front and recurring monthly fees.

“Intentionally targeting families with predatory mortgage services because of their national origin is a clear violation of the Fair Housing Act,” said Paul Compton, HUD’s General Counsel. “This charge sends a clear message that HUD will protect the housing rights of all persons to the fullest extent of the law.”