The Department of Housing and Urban Development has rejected allegations of racial discrimination against U.S. Bank in its maintenance of foreclosed homes.
Instead, HUD found that the Minneapolis bank properly maintained real estate-owned homes in predominantly black and Hispanic neighborhoods and that it cared for them as well as it did for its properties in white neighborhoods.
In a 30-page report sent to the lender on Tuesday, HUD said that U.S. Bank properly addressed maintenance issues at 119 properties serviced on behalf of the Federal Housing Administration. HUD also accepted the bank's claim that it was not responsible for the maintenance of another 275 homes for which it served only as a trustee.
"The evidence does not show any … difference in treatment of properties based on the racial and ethnic makeup of the neighborhoods," the report said.
The National Fair Housing Alliance, a Washington, D.C., nonprofit that filed an administrative complaint with HUD in 2012, said it would appeal HUD's determination letter, said Steve Dane, an attorney at Relman Law who represents the alliance.
Teri Charest, a spokeswoman for U.S. Bank, said: "We believe the decision speaks for itself."
In the aftermath of the financial crisis, several large banks including Bank of America and Wells Fargo were lambasted by the nonprofit's executive director Shanna L. Smith. Smith held nearly a dozen news conferences alleging racial discrimination by the banks in the maintenance of REO properties.
American Banker wrote a two-part series raising doubts about the validity of the NFHA's claims against the banks. In many cases, the nonprofit conflated the banks responsible for maintaining properties with those that were serving as trustees for mortgage-bond investors.
The nonprofit had originally sought tens of millions of dollars from U.S. Bank for its alleged misdeeds.
A similar complaint filed by the nonprofit against Bank of America is still pending; HUD has not ruled on it.
In 2013, Wells Fargo agreed to a $42 million settlement over similar claims that provided a financial windfall for the NFHA and its local member organizations.
The nonprofit sought to prove racial discrimination by taking photos of run-down properties with trash-strewn yards and boarded-up windows.
But in one footnote in the report, HUD said it was worth noting that the NFHA cited deficiencies "as minimal as a single piece of lightweight trash, such as a candy wrapper, that may have just blown onto a property, and may likely blow away before the respondent would have ever known of its presence, or had an opportunity to address it."
HUD suggested that photos were not reliable because they depicted a single snapshot in time and, as such, did not take into account the condition of the properties when banks took possession of them or the lack of upkeep by the foreclosed borrowers.
"The photographs, taken together, did not provide evidence showing that [U.S. Bancorp] maintained properties in minority neighborhoods poorly," HUD stated in the report. "The photographs, standing alone, do not provide the necessary context for a finding of discrimination on the basis of race, color or national origin."
HUD investigated all 119 properties and found that U.S. Bank spent an average of $11,175 to maintain properties in minority neighborhoods in Milwaukee, compared with $10,733 in white neighborhoods. In Indianapolis, the bank spent an average of $12,553 for maintenance in minority areas versus $9,359 in white areas. In Dayton, spending in minority neighborhoods averaged $8,439, compared to $11,472 in white areas.
HUD also found that 10% of the properties identified by the nonprofit were no longer owned by U.S. Bank at the time the NFHA took photos, and had already been conveyed to new owners.