A Refiled Complaint Against Deutsche Bank National Trust Co., Ocwen and Altisource Solutions Inc. Can Proceed Says Illinois Judge

A lawsuit alleging financial services companies discriminated against minority neighborhoods in 30 cities across the country, including Gary and Indianapolis, has been allowed to move forward in federal court.

The complaint, filed against Deutsche Bank National Trust companies, Ocwen Loan Servicing LLC and Altisource Solutions Inc., asserts the financial services companies failed to maintain foreclosure homes in black and Latino neighborhoods.

Plaintiffs in the lawsuit are the National Fair Housing Alliance and more than a dozen other fair housing organizations, including Fair Housing Center of Central Indiana.

Based on collected data, the plaintiffs allege the bank-owned homes in communities of color were much more likely to be in disrepair than the homes in predominantly white neighborhoods.

Foreclosed houses in the minority neighborhoods were found, by the plaintiffs, more likely to have overgrown or dead shrubbery, overgrown lawns, broken mailboxes, damaged steps, holes in the homes, and broken windows.

Conversely, foreclosed houses in primarily white working- and middle-class neighborhoods were more likely to have the lawns mowed, weeds and vines removed, leaves rakes, trash removed, and doors and windows secured or repaired.

In an order in National Fair Housing Alliance, et al. v. Deutsche Bank National Trust, as trustee; Deutsche Bank Trust Company Americas, as trustee; Ocwen Loan Servicing, LLC; and Altisource Solutions, Inc., 1:18-cv-00839, issued Nov. 13, the U.S. District Court for the Northern District of Illinois, Eastern Division, denied in part the defendants’ motion to dismiss.

The court found “there is a ‘clear, direct and immediate’ path between Defendants’ alleged discriminatory lack of maintenance and Plaintiffs response to that lack of maintenance through investigations, reporting, and advocacy.”

The plaintiffs originally filed the lawsuit in February 2018. After the defendants successfully moved to have the case dismissed, the plaintiffs filed again in May 2019.

In the second amended complaint, the plaintiffs again allege the financial services companies’ maintenance on the exteriors of the foreclosed properties constitutes unlawful racial discrimination, in the form of both disparate impact and discriminatory treatment, under the Fair Housing Act.

Following the court order, plaintiffs hailed the outcome.

“This is an important victory for the residents of Black and Latino neighborhoods in cities across the country,” Lisa Rice, president and CEO of the National Fair Housing Alliance, said in a statement.

“The investigation we conducted clearly shows that Deutsche Bank Trust companies and other financial giants have policies that result in disparate outcomes based on the racial composition of the neighborhood.

It also demonstrates a pattern of intentional discrimination because of the willful neglect of bank-owned houses in communities of color.”

A national coalition of fair housing advocates has filed a complaint in federal court alleging intentional and discriminatory violations of the Fair Housing Act of 1968 against minority communities across the country, including communities in Indiana.

The National Fair Housing Alliance – joined by similar local organizations, including Fair Housing of Central Indiana – filed suit Thursday in the U.S. District Court for the Northern District of Illinois, alleging Deutsche Bank, Ocwen Financial Corp. and Altisource Portfolio Solutions, Inc. have repeatedly and intentionally failed to oversee the maintenance and proper marketing of real estate owned homes in black and Latino communities, leading to health and safety concerns and falling property values. Deutsche Bank and its related defendants became the owners of record of thousands of REOs after the foreclosure crisis, while Ocwen and Altisource provide property preservation and management services to Deutsche Bank.

The NFHA’s complaint stems from an internal investigation that began in 2011 and sent the organization across the country to observe the bank’s REOs in predominantly white and black and/or Latino communities. The results of the initial investigation and subsequent follow-ups revealed disparities between the treatment of homes in white and non-white communities, with white communities regularly maintained more frequently than non-white communities, the complaint alleges.

The association visited 1,141 properties across the United States to observe two central issues: property maintenance and sales marketing, both of which are the responsibility of Deutsche Bank, the complaint says. Maintenance concerns included broken locks, unkempt yards, mail pile-up and similar issues, while marketing problems included a lack of for-sale signs, or the presence of warning signs on a property.

On a national level, 90.9 percent of Deutsche Bank REOs in non-white communities had at least five maintenance or marketing deficiencies, while 57.2 percent of white communities were found to have the same amount, according to the NFHA’s research. The same percentages were found among the 18 Indianapolis properties investigated, while 100 percent of non-white, Deutsche-owned REOs in Gary had at least five deficiencies. About 46.2 percent REOs in white Gary communities had the same number.

“The intentional neglect of bank-owned homes in communities of color devalues the property and the lives of the families living in the neighborhoods around them,” NFHA president and CEO Shanna L. Smith said in a statement. “The health and safety hazards created by these blighted Deutsche Bank-owned homes affect the residents, especially the children, living nearby.”

The 84-page complaint – intentionally filed on Feb. 1, the first day of Black History month – alleges five violations of the Fair Housing Act stemming from intentional discrimination based on race and national origin, and the perpetuation of segregation. The fair housing advocates demanded a jury trial and sought declaratory and injunctive relief, as well as damages, punitive damages, costs and attorney’s fees.

“It is important to note that Deutsche Bank, Ocwen and Altisource were all paid to secure, maintain and market these homes,” Smith said. “No one is asking for special treatment; we simply ask that these companies provide the same standard of care for all bank-owned homes, regardless of the racial or ethnic composition of the neighborhood in which they are located.”

Amy Nelson, executive director of Fair Housing Center of Central Indiana, noted local fair housing advocates have raised this issue with Deutsche Bank multiple times over the years, including a sit-down between NFHA and the bank. However, those efforts did not inspire the bank to change its practices, she said.

“It remains disappointing that despite Deutsche Bank being on notice of this issue for several years, we continue to see their failure to adequately market their foreclosures in Indianapolis majority neighborhoods of color,” Nelson wrote in an email to the Indiana Lawyer. “These middle and working class neighborhoods of color will continue to struggle and leg behind any recovery as longa s Deutsche, and others like them, fail to properly maintain the homes they own.”

Representatives from Deutsche Bank did not immediately respond to messages seeking comment.

The case is National Fair Housing Alliance, et al. v. Deutsche Bank, et al., 18 CV 839.