Lawsuit Alleges Racial Bias in HUD Note Sale Program

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The U.S. Department of Housing and Urban Development (HUD) is the subject of a class action lawsuit that claims its Note Sale Program has created a disproportionately discriminatory impact on New York City’s African-American homeowners.

The lawsuit, which was filed last week by MFY Legal Services Inc. and Emery Celli Brinckerhoff & Abady LLP, alleges that HUD sold approximately 1,000 delinquent Federal Housing Agency (FHA) mortgages in New York City to private investors without informing the homeowners and without alerting these homeowners that they would no longer have the basic due process protections of an FHA mortgage. The lawsuit cites cases of mortgages being sold even as the homeowner was in the process of receiving a loan modification.

The lawsuit also presents data that determined the mortgages being sold off in HUD’s Note Sale Program were primarily on residences in predominantly African-American neighborhoods, particularly southeast Queens and east Brooklyn. HUD’s next Note Sale is scheduled for Sept. 14.

“Homeownership is the principal way that families of color accumulate wealth,” said Diane Houk, of Emery Celli Brinckerhoff & Abady. “It is stunning that HUD, whose mission is to affirmatively further fair housing for all Americans, would carry out a program with a disparate and destabilizing effect on African-American communities.”

Since the Note Sale Program began in 2010, HUD has sold more than 113,000 mortgages nationwide to private companies. HUD plans to conduct another Note Sale on Sept. 14, 2016.

Tom DeWeese
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Tom DeWeese is President of the American Policy Center and National Grassroots Coordinator for CFACT (Committee for a Constructive Tomorrow) working to help local activists organize into Freedom Pods ( He is also the author of three books, including Now Tell Me I Was Wrong, ERASE, and Sustainable: the WAR on Free Enterprise, Private Property, and Individuals.