People looking to buy a home, or keep the home they’re in, in distressed communities of color in the south suburbs and Northwest Indiana are expected to benefit from a $53 million settlement with mortgage lender Fannie Mae.

Formally known as the Federal National Mortgage Association, Fannie Mae agreed Monday to settle a federal lawsuit alleging it did a better job of keeping up foreclosures in predominantly white communities than in communities with significant Black and Latino populations.

The lawsuit was filed in late 2016, and while Fannie Mae is paying out $53 million as part of the settlement, it is not admitting to any wrongdoing and denies the allegations made by the National Fair Housing Alliance, according to the settlement.

The South Suburban Housing Center was among 20 fair housing organizations nationwide that joined in the lawsuit, and will get about $1.5 million that it plans to use for down-payment assistance for homebuyers as well as mortgage assistance to property owners, according to John Petruszak, the center’s executive director.

The money will help the center expand a program it began in early 2015 which has, up to now, been focused on providing assis

tance in Black and brown communities in the south suburbs, Petruszak said.

Half the funds from the Fannie Mae settlement will go toward establishing a similar grant program in Northwest Indiana, he said.

“The focus will be on the most distressed communities,” such as Gary, he said Tuesday.

The program operating in the south suburbs provides grants of up to $15,000 for down payments on homes and similar size grants for homeowners behind on their mortgage payments, Petruszak said.

“We’ve given out more than $1 million in grants so far,” he said.

The housing center hopes to replicate that success in Northwest Indiana, noting that the community relief program it now operates doesn’t serve that area.

“We are happy to be able to provide some resources to Northwest Indiana,” Petruszak said.

The case against Fannie Mae was the first time a federal court confirmed that the nation’s fair housing laws cover the maintenance and marketing of foreclosed homes, known as Real Estate Owned or REO properties, according to the law firm Relman Colfax, with represented the national alliance and the other housing groups.

Fannie Mae, the law firm noted in a news release announcing the settlement, has put in place “practices that will help prevent harmful treatment of communities of color in the future.”

Those include increasing its oversight of maintenance of properties it owns and prioritizing owner-occupants rather than investors as purchasers of REOs, according to the firm.

In the settlement, Fannie Mae noted that it had taken steps, before and after the lawsuit was filed, to enhance the maintenance and marketing to buyers of properties on its books.

Among the steps taken, it said, was an increase in inspections of properties in majority nonwhite census tracts, increasing from a sample size of 30% of the properties to all of those properties.

Also, Fannie Mae said that exterior maintenance of properties has been improved, with outside work such as lawn cutting now done on a weekly basis rather than “as needed,” the prior policy, according to the settlement.

Fannie insisted the payout was not an admission of guilt but simply “a compromise to avoid the cost and uncertainty of” ongoing litigation.

Along with the South Suburban center, HOPE Fair Housing Center in Wheaton and Open Communities in Evanston will share in $4 million from the settlement, Petruszak said.

In 2013, the National Fair Housing Alliance and other groups, including South Suburban, were part of a settlement of a federal housing discrimination complaint against Wells Fargo.

Of the overall payout of $27 million, Petruszak said his organization received $1.4 million to establish the community relief program, initially focused on south suburbs hardest hit by the 2008 recession and resulting housing collapse.

Buyers who take advantage of the down payment loan grant have to agree to live in the home for five years, with the center placing a lien on the home, expiring after five years, as a financial incentive for buyers to stay there.

Petruszak said that, through the program, the center has awarded more than 90 grants, and “there was one case where we had to recapture the money” through a lien.

That track record shows the grant program is working and can be easily replicated in Indiana, he said.

The allegations in the Fannie Mae complaint echoed those made in the Wells Fargo complaint, which alleged the bank took better care of its foreclosures in white neighborhoods than those in African American and Latino communities.

For research for what would eventually become part of the lawsuit against Fannie Mae, the South Suburban Housing Center, in 2012, began evaluating maintenance practices of Fannie Mae-owned properties in the south and southwest suburbs, as well as in Northwest Indiana.

In the Southland, the center looked at 78 homes in suburbs with majority-black populations — including Dolton, Hazel Crest and Riverdale — and compared conditions to houses Fannie Mae owned in towns such as Mokena, Oak Forest and Tinley Park.

In Northwest Indiana, 25 properties were evaluated in communities including Gary, Munster, Highland and Cedar Lake.

The allegations in the federal lawsuit were first raised in a complaint filed by the national alliance with the U.S. Department of Housing and Urban Development, contending Fannie Mae was in violation of federal law by allegedly neglecting foreclosed homes in minority neighborhoods in 34 metro areas.

mnolan@tribpub.com