Banks Neglect REO Homes in Minority Areas, Study Says

After the housing meltdown, banks have repeatedly come under fire for allegedly using discriminatory lending practices against minorities. A study from the Center for Responsible Lending found that blacks and Hispanics with credit scores above 660 received subprime mortgages three times as often as whites with the same rating. And allegations that Countrywide charged 200,000 minority borrowers higher rates and fees than whites led to a historic $335 million discrimination settlement between its parent company, Bank of America, and the Justice Department. Now a study of more than 1,000 foreclosed properties suggests that lenders are much more concerned with the upkeep of their homes set in affluent, predominantly white neighborhoods than those in more diverse ones.

"REO properties in communities of color generally appeared vacant, abandoned, blighted and unappealing to real estate agents who might market the unit to homebuyers," the report from the National Fair Housing Alliance says. "On the other hand, REOs in white communities generally appeared inhabited, well-maintained and attractive to real estate agents and homebuyers."

The NFHA study, "The Banks Are Back -- Our Neighborhoods Are Not," has led the civil rights organization to bring a discrimination suit against Wells Fargo, and the alliance filed a complaint against the bank with the U.S. Department of Housing and Urban Development on April 10.

Examining over 1,000 bank-owned properties, also known as "REO properties," the nonprofit's study looked at a wide array of maintenance and marketing indicators, "including curb appeal, structure, signage, indications of water damage, and condition of paint, siding and gutters," to draw conclusions about maintenance standards.

In the wake of the housing bust, millions of Americans have lost their homes to foreclosure, resulting in a glut of bank-owned homes on the market. And aside from those owned by the banks, U.S. taxpayers reportedly are responsible for about 200,000 vacant homes by proxy -- because of the bailout of Fannie Mae and Freddie Mac. Those government sponsored enterprises will spend more than $40 million just to mow the lawns of these properties over the next year, Yahoo! News says.

See also:
Home Costs: 4 Crucial Questions Reveal Hidden Expenses

Principal Reduction Plan for Fannie, Freddie Meets Resistance

Short Sales That Are Long on Value
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Banks Neglect REO Homes in Minority Areas, Study Says

The perfect-storm buying conditions of today don't end with record low interest rates and severely depressed home prices: The housing meltdown has also caused a bargain-friendly type of home sale to flourish, injecting the market with even more potential for great deals. No, we're not talking about foreclosures: We're talking about short sales.

A "short sale" is one in which a lender agrees to allow a borrower to sell his home -- knowing that the proceeds from the sale will not be enough to cover the full amount of money that the borrower owes on the home. Short sales usually offer below-market rates, and make it less likely that the homes contain hidden defects, as some vacant foreclosures might.

But as Joe Buczkowski, CEO of LeaseRunner, an online management tool for landlords, puts it, "It takes a very special buyer in order to complete the short sale." That's because a short sale is often a drawn-out process, since sellers must persuade their lenders to sign off on the sale. Sometimes buyers who have made an initially well-received offer will wait months only to learn that the seller's bank has rejected the sale. 

Nonetheless, short sales can offer savvy home homebuyers enticing discounts if they're willing to take the risk.

From a discounted luxury log home in Carbondale, Colo., (pictured here) to a single-family house in Atlanta that just got a $500,000 haircut, click through our gallery to see some of the most tempting short sale opportunities. 

Location: Sarasota, Fla. 
Price: $995,000
Beds/Baths: 4/5
Sq. Ft.: 5,298

See the listing for more details.

Location: Scottsdale, Ariz.
Price: $900,000
Beds/Baths: 4/5
Sq. Ft.: 5,064

See the listing for more details

Location: Rancho Santa Margarita, Calif. 
Price: $700,000
Beds/Baths: 5/3
Sq. Ft.: 3,400

See the listing for more details

Location: Norwell, Mass. 
Price: $720,000
Beds/Baths: 5/4
Sq. Ft.: 4,008

See the listing for more details

Location: Middletown, Md.
Price: $492,100
Beds/Baths: 4/4
Sq. Ft.: N/A

See the listing for more details, or see other homes for sale in Middletown, Md.

Location: Saint Albans, Mo. 
Price: $425,000
Beds/Baths: 4/5
Sq. Ft.: 3,190

See the listing for more details

Location: Atlanta
Price: $1 million
Beds/Baths: 6/6
Sq. Ft.: N/A

See the listing for more details.

Location: Carbondale, Colo. 
Price: $999,000
Beds/Baths: 4/6
Sq. Ft.: 5,500

See the listing for more details

Location: Demarest, N.J.
Price: $999,000
Beds/Baths: 5/5
Sq. Ft.: N/A

See the listing for more details

Location: Georgetown, S.C.
Price: $998,000
Beds/Baths: 4/4
Sq. Ft.: N/A

See the listing for more details.


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