The Northern District of California has approved a $53 million settlement to be paid by the Federal National Mortgage Association (Fannie Mae) to resolve racial discrimination claims concerning Fannie Mae’s management and marketing of real estate-owned (REO) properties.

In 2016, multiple nonprofit housing organizations filed a complaint against Fannie Mae, alleging that the organization failed to maintain foreclosed properties in Black and Latino neighborhoods to the same quality and standards as it did in comparable white neighborhoods. The organizations further alleged that Fannie Mae’s differential treatment exacerbated the damage caused to these neighborhoods by the 2008 real estate collapse and impeded their recovery. In their 2018 amended complaint, the organizations noted that between 2011 and 2015 “[o]ver the course of four years, [they] investigated over 2,300 properties owned and maintained by [Fannie Mae], collected evidence on over 35 aspects of the maintenance of each property investigated, and accumulated over 49,000 photographs.” This evidence demonstrated Fannie Mae and its agents’ failure to “conduct routine exterior maintenance and marketing of REO properties in communities of color,” leaving these properties in a state of neglect, which, in turn, resulted in properties in predominantly white areas being in a materially better condition.

The settlement was executed and approved on February 7. Under the settlement, Fannie Mae will pay $53 million, with roughly $35 million being earmarked specifically for addressing “community needs […], including addressing home ownership, neighborhood and/or community stabilization, access to credit, property rehabilitation, residential development in African American and Latino communities, fair housing education and outreach, counseling, and other fair housing activities.” The lawsuit is also notable in that the courts confirmed for the first time that fair housing laws govern the maintenance and disposition of REO properties.

The settlement is another in a string of recent developments in the fair lending and housing discrimination space, such as the FTC’s 2021 report highlighting the disproportionate impact of consumer fraud on minority communities, the DOJ’s “Combatting Redlining Initiative,” and state regulation around fair housing, such as New York’s industry letter on preventing sexual orientation to name a few.

For creditors, the key takeaway is that fair lending continues to be a key priority for state and federal regulators in a wide array of contexts. Troutman Pepper will continue to monitor cases and other litigation centered around fair lending and other related issues.

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Photo of Alexandria Pritchett Alexandria Pritchett

Alexandria is an associate in the firm’s Consumer Financial Services practice. She recently graduated from the University of San Diego School of Law, where she completed her J.D. and served as president of the Black Law Students Association. 

 

While in law school, Alexandria 

Alexandria is an associate in the firm’s Consumer Financial Services practice. She recently graduated from the University of San Diego School of Law, where she completed her J.D. and served as president of the Black Law Students Association. 

 

While in law school, Alexandria served as a certified legal intern for the San Diego Public Defender’s Office. She also served as a corporate counsel intern for AMN Healthcare and judicial extern for the Hon. Cynthia Bashant of the U.S. District Court of the Southern District of California. Alexandria earned her B.A., cum laude, from Syracuse University. 

 

At USD Law, Alexandria was admitted into the Order of Barristers and received CALI Excellence Awards in the following courses: Legal writing and research, Jurisprudence, and Civil Rights Theories.

**Licensed to practice in California.

Photo of Chris Capurso Chris Capurso

Chris’ practice focuses on consumer financial services law, primarily on federal and state law compliance matters. Chris regularly advises financial institutions, lenders, and sales finance companies in the development and maintenance of closed-end and open-end lending, automobile finance, fintech, point-of-sale, small dollar, and…

Chris’ practice focuses on consumer financial services law, primarily on federal and state law compliance matters. Chris regularly advises financial institutions, lenders, and sales finance companies in the development and maintenance of closed-end and open-end lending, automobile finance, fintech, point-of-sale, small dollar, and other credit programs. He provides guidance on federal consumer protection laws and regulations, including TILA, ECOA, ESIGN, and GLBA.

Photo of Alan D. Wingfield Alan D. Wingfield

Alan Wingfield is a partner in the firm’s Consumer Financial Services practice, with a focus on Financial Services Litigation and consumer law compliance counseling. Alan has represented businesses in many venues nationally in class action and individual consumer litigation. Alan’s practice includes compliance…

Alan Wingfield is a partner in the firm’s Consumer Financial Services practice, with a focus on Financial Services Litigation and consumer law compliance counseling. Alan has represented businesses in many venues nationally in class action and individual consumer litigation. Alan’s practice includes compliance counseling to help businesses with the myriad federal and state consumer protection laws and laws regulating financial services companies.

Photo of David N. Anthony David N. Anthony

David is an experienced trial attorney with a concentration in litigating financial services and business disputes, including class actions related to the FCRA, FDCPA, TCPA and other consumer protection statutes.