When a bank forecloses on a home it has a legal duty to maintain the property to some basic standard so as not to depress property values for neighboring homeowners. NFHA inspectors went to foreclosed homes either owned or managed by BOA in various cities and evaluated the upkeep of foreclosed properties in both predominantly white and predominantly minority neighborhoods, and found that more than half of the bank-owned properties in minority areas showed multiple signs of neglect. None of the bank-owned homes in white neighborhoods that NFHA inspectors went to showed similar levels of neglect. Wednesday’s complaint adds to an already large pile of evidence from NFHA inspectors, who first started reporting data on discriminatory patterns of neglect from foreclosing banks in 2009.
Over three years of on-the-ground inspections covering 621 BOA-owned properties in 18 different metropolitan areas from Philadelphia to Phoenix, NFHA identified a pattern of disparate upkeep using three dozen separate evaluative factors including structural damage and cosmetic factors like paint and siding. The complaint lists detailed findings for each of the 18 metro areas. In Philadelphia, bank-owned homes in communities of color were 5 times as likely as those in white communities to have broken or boarded-up windows. Half the bank-owned properties in Las Vegas communities of color had damaged fences, a problem found at zero of the inspected properties in white communities in the area. Denver’s communities of color were 5.5 times as likely to have foreclosed properties with damaged siding as were its white communities.
This sort of statistical evidence of discrimination relies upon a legal theory called “disparate impact.” By measuring the outcomes of bank behavior in different sorts of communities, NFHA sidesteps the thorny legal question of discriminatory intent. Under disparate impact theory, it doesn’t matter that Bank of America never intended to neglect black and hispanic property owners while fulfilling its duties to white owners – the statistics show they have discriminated, maliciously or otherwise. HUD officially adopted disparate impact as an evaluative rubric in February, which helped pave the way for NFHA complaints like the one filed Wednesday. It also helped induce Wells Fargo to settle a similar NFHA complaint for $42 million in June.
But the Supreme Court will hear a case this session involving the black residents of Mt. Holly, New Jersey, who say they were illegally pushed out of their neighborhood by the city over 10 years ago. The Mt. Holly case hinges on disparate impact arguments and scholars believe three of the high court’s conservative judges are poised to strike down disparate impact in housing law. In July it appeared that the city and the plaintiffs might be nearing a settlement but none has yet materialized, and all sides of the case have begun filing legal briefs with the court.