The NFHA originally funded its REO discrimination investigation in part with modest grants from HUD and Fannie Mae. The NFHA inspected 264 homes in four cities, according to HUD grant documentation obtained through a Freedom of Information Act request. It then graded the properties on factors ranging from structural integrity to "curb appeal" and declared that it had uncovered widespread discrimination.
"Are lenders/servicers maintaining foreclosed homes in neighborhoods of color in a manner similar to predominately White neighborhoods? NO," the group wrote. The NFHA responded by teaming up with Washington, D.C. law firm Relman, Dane & Colfax, a frequent legal partner, and discussing with HUD and the Justice Department's fair housing enforcement staff an expansion of its investigation. It also published a report in 2009 titled "Here Comes the Bank, There Goes Our Neighborhood."
That scaled-up investigation—funded with additional HUD grants—provided the material for NFHA's 2012 HUD complaints against Wells Fargo, Bank of America, and U.S. Bancorp. In press conferences announcing the Bank of America filing, Smith declared that its "disregard and disrespect for communities of color will not be tolerated." The bank had "no excuse" for the condition of the properties, Smith said, because the NFHA had put B of A "on notice" about the problems more than two years earlier.
Putting Bank of America "on notice" did not include providing it with addresses for the overwhelming majority of the properties that NFHA claims the bank neglected—information that the bank requested and would seem crucial if NFHA's goal was to ensure that the homes were quickly repaired.
"When they [the banks] are willing to cooperate with this investigation, then they will get the addresses," NFHA's Smith said during an October 2013 press conference. "Besides," she added during a subsequent interview, "we wouldn't file a complaint against someone who doesn't have liability."
Bank of America spokesman Dan Frahm voiced frustration over NFHA's withholding of most of the addresses on which it has based its claims. In the minority it has identified, the group is "pointing to properties we are not responsible for or others we have long since helped transition to new homeowners," he said.
The NFHA's original study "was undertaken solely for the purpose of filing HUD complaints accompanied by press releases and obtaining big settlements," adds Sandler, the bank defense attorney. "NFHA will not share information [about specific properties] because it knows that exposing the basis for its allegations will empirically demonstrate them to be false and misleading."
Home Court Advantage
Withholding evidence until a bank agrees to cooperate would not pass muster in a court of law. Fortunately for the NFHA, it has found a more forgiving venue in which to press its cases: HUD's Office of Fair Housing and Equal Opportunity. It's the same office that funded NFHA's 2009 investigation and whose boss, Sara Pratt, is a former NFHA official and consultant.
Pratt, a University of Arizona-trained lawyer, has made a career out of pursuing housing discrimination cases. After working as a civil rights attorney in Kentucky, she spent six years until 1999 as a HUD director of enforcement before moving into the same role at NFHA.
She launched her own fair housing consultancy, Sara Pratt and Associates, in 2001, while continuing to work for the NFHA as a strategist and faculty member at its fair housing training school. Some of her advocacy work for NFHA appears to relate directly to the REO enforcement work she now oversees at HUD.
In 2008, Pratt was the primary author of a 99-page report, "The Future of Fair Housing," sponsored by the NFHA and allied civil rights advocacy groups. The paper recommended that the government look closely at fair housing and REO marketing. It also declared that HUD's funding for fair housing groups like NFHA and its members was "grossly inadequate." In 2009, she published an NFHA-commissioned paper on the "need for action" to strengthen HUD's disparate impact discrimination regulations.
Pratt returned the following year to HUD, where she is the Deputy Assistant Secretary for Enforcement and Programs in the Office of Fair Housing and Equal Opportunity. Requests to interview Pratt were declined through a HUD spokesman.
During Pratt's first year back at HUD, she was subject to the same prohibitions as other federal employees against work involving parties for which she'd previously served as an employee or consultant, said HUD General Counsel Helen Kanovsky. Another senior HUD official, who agreed to speak on the condition that his name not be used, dismissed suggestions that Pratt's history might have biased her in favor of the NFHA.
"Sara Pratt had nothing to with the design or implementation of NFHA's REO investigation," Smith says.
What is beyond dispute is that Pratt and her HUD unit investigated the banks and worked with NFHA to negotiate its lone completed settlement. In April, Wells Fargo agreed to pay $42 million to settle claims that it had mismanaged REO properties.
The agreement yielded more than $30 million in grants for the NFHA and its affiliates via six separate channels. That sum is unremarkable in the world of megabank settlements, but it amounted to major financial coup for housing groups. The bulk of the funds, $27 million, went to grants to 19 local NFHA affiliates. The Greater New Orleans Fair Housing Center and North Texas Fair Housing Center, for example, will receive $1.4 million each, which is more than double their annual revenues in recent years, Internal Revenue Service filings show.
Beyond the grants, Wells was further required to: reimburse NFHA for $3 million in legal expenses; sponsor two NFHA conferences at a cost of $150,000 each, including meals and travel stipends for speakers; and pay $250,000 to cover the cost of NFHA community seminars on delinquencies, foreclosures and REO properties.