Vision Rent-to-Own “Buyers” Meet and Find Out Every Deal is Different

San Francisco  The first organizing meeting in Detroit of the Home Savers Campaign had spirited discussion when families discovered that they only had one thing in common in the contracts they had signed with Vision Property Management or its subsidiaries: the contract itself. When it came to the terms, to everyone’s shock and anger, everyone had a different deal!

The differences were not simply where we might expect to find them in the price of the houses they were hoping to buy or the number of years to term. In fact the prices were all very close to each other. As the campaign has come to expect from visiting so many families in Pittsburgh, Philadelphia, Akron, Youngstown, and now Detroit, some families attending the meeting were still shocked to find out that in seven years they would not own the home as they expected, but simply face wrenching choices between balloon payments, long term agreements, or walking away from extensive investments in money and labor in repairs.

The differences in the contracts were huge. Excitedly talking about their contracts, they found for example that in some contracts as little as $14 of their monthly payment was going to principle on the purchase while in others as much as $150 was being applied. That was often the case when the payments were virtually identical. In several cases, they discovered they had not been clearly told how much of their payment was going to principle at all. Even when the purchase price of the houses were roughly equivalent, families were finding that the amount of their monthly payment being applied for insurance was often different.

Looking at the question of tax payment which is especially freighted with concern, since nonpayment of taxes to the county could lead to loss of the property on tax delinquency sales. Only one family could determine from their payment the amount that was supposedly being paid to taxes, while the other families at this first organizing meeting became worried that since there was no indication, Vision might not be paying their taxes at all. Even in the one case where the tax level was stated at $150 per month or $1800 per year, there was skepticism that the house valued so modestly really was sustaining such a relatively high cost compared to true value.

Many of the people at the meeting were also on their second contract with Vision. The first had given them up to 45 days to make good on their payments, while the more recent gave Vision the right to void their option to purchase if they were late on the payments at all, making the contracts essentially no more than rental agreements, despite the fact that this was a triple-net lease with the “buyer” paying everything including thousands and thousands in repairs. One family was livid having invested over $50,000 in repairs, yet still debating whether or not they should walk away. Everyone at the meeting shared stories of about the “fishing” Vision’s representatives did with them over the phone to try and suss out the amount families had invested themselves in repairs, presumably for the company to guess whether the property might have been fixed off enough for them to seize the first opportunity to evict and flip.

People were happy to meet, but that was the only happiness in the room once the members and organizers cleared the fog away that hung over the legalese of the agreements. There was anger and plans for quick action. On the question of fight or flight, people were ready to fight. Powered by people, the campaign now begins in earnest.

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Predatory Land Contracts and Rent-to-Own Schemes May be More about Affordable Housing than Home Ownership

Detroit   We had hit the front door a couple of times without success. The house was a single-story white brick facade set back from the street. If we had not been anywhere other than the west side of Detroit, we might have been able to blink our eyes and believe we were in a working-class suburb. We would have had to clear our minds of the vision of driving only minutes before in street after street of neighborhoods where the grass was already knee-high across acres and acres speckled with the occasional occupied house along with some deteriorating ghost structures.

The local public radio reporter rolling with us on assignment from Reveal, the well-regarded national investigative pod-cast operation on the West Coast, offered a weak apology earlier, saying something about hoping this wasn’t all we would see of Detroit. I had replied that I had been here before, and Dine’ Butler, an organizer with me, reminded her that we were from New Orleans, where we had post-Katrina neighborhoods like this as well.

We knew someone was home because the back end of the small SUV was wide open. Dine’ went around the side to the fence, and we quickly met the master of this castle. We knew he was on a land contract purchase agreement with Harbour Portfolio. He had been in the house 2-years, and had looked at a lot of Harbour houses before seeing this one and believing he could make a “go” of it. He had paid about $1500 down payment on a $42,000 purchase price with a 30-year contract at between 12 and 13% interest with monthly payments between $400 and $500. His family had been there for 2 years. He had put in about $7000 cash having to install a new furnace, roof, and wiring, which was still a work in progress. I asked him how he “felt about it,” and he said, “it’s all right for now until something better comes up.” Could he have applied for a conventional mortgage, I asked, and he answered, “not at that time.” He would be glad to come to a meeting and share his experiences and talk to others in the same situation.

The more visits we log, the more that it seems to me we aren’t hearing the responses we might expect from typical home buyers or home owners. Too often when we peel back the layers of these predatory contracts with people, there reaction isn’t surprise and in fact often seems more flight, than it is fight. People are often shocked by how bad their contracts are, but seem to have their eyes wide open to the fact that their housing is substandard. With the average rent in Detroit for a two-bedroom apartment reportedly $1300, many of them seem to almost be doing the math in their heads that even with a down payment and making repairs with sweat equity and cash on hand, they may be in better financial shape in these houses, even if they are at best “works in progress,” and at worse uninhabitable.

We haven’t hit enough doors and talked to enough people yet on the Home Savers Campaign, but listening to people and hearing what they are really saying, there’s no question that these land contract and rent-to-own or lease purchase schemes are predatory, but the crisis we are facing may be less about home ownership in the classic sense, and speaking a lot more to the crisis in available, decent affordable housing. With decreasing public housing units and section 8 vouchers and long waiting lists for both, with rising rents that are taking 50% or more of many household incomes on one hand, and an unforgiving post-2008 credit desert on the other with higher down payments, higher credit scores, and higher bank lending requirements, a lower income, working family may find themselves caught in the middle where a bigger place in rougher condition for lower monthly rent and pay-as-you-go repairs comes to look like a deal worth taking, everything being unequal. Heck, they may figure, there’s a slim chance, like playing the lottery, that they might even own the house some day…a carrot later, while being beaten by the sticks now.

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Predatory Lenders Making American Nightmares From American Dreams

Greenville   Here’s a guest blog run on the workingclassstudies.wordpress.com blog for Working-Class Perspectives shepherded by Professors Sherry Linkton of Georgetown University and John Russo, Visiting Scholar of the Kalmanovitz Initiative for Labor and Working Poor at Georgetown, and formerly of Youngstown State University in Ohio.

Posted on May 1, 2017 by Working-Class Perspectives

Yes, Donald Trump is President, and he accomplished this upset in part by shattering the working-class firewall in long time Democratic, heartland strongholds of Pennsylvania, Michigan, and Ohio. We cannot respond only with resistance.  An effective defense, in the Rust Belt or anywhere else in the country, requires a deeply rooted offense focused on the traditional Democratic working-class base, and that requires organizations and organizers who will to listen and offer meaningful responses to real pain being felt by so many at the grassroots level.

Amid repeated promises from the White House and Republicans to cut from healthcare, Medicare, and other elements of the already tattered safety net, there are few issues so stark, or so predatory, as the credit desert that keeps working families from securing decent and affordable housing. This is a problem the Real Estate Developer-in-Chief should well understand.

Since the 2008 Great Recession, the devastation of foreclosures, for individuals and communities, has become well-known.  Less appreciated has been the banks’ response. As the subprime market ended, many lenders now demand higher credit scores, larger down payments, and higher minimum loan levels for mortgages.  Marginal financial institutions, specializing in predatory products, moved in, reviving instruments that had largely disappeared from urban home ownership markets with the Home Mortgage Disclosure Act of 1975 and the Community Reinvestment Act of 1977, laws that also ended redlining in minority communities.  Contract-for-deed, installment land purchases, rent-to-own, lease purchase, and other deceptively-named transactions lured families into hoping for affordable housing and home ownership into agreements that exploited them instead.

Worse, much of the housing stock involved was had been acquired from Federal National Mortgage Authority (“Fannie Mae”) auctions of foreclosed properties by hedge funds, Wall Street, and vulture financiers pyramiding one injury on top of another.  Companies like Harbour Portfolio embraced contract “sales,” while others, such as Vision Property Management, repurposed thousands of homes using rent-to-own scams.  More well-known operators, like Goldman Sachs, bought more than 26,000 homes to satisfy securitization settlements with the government, while Apollo has specialized in similar flip-and-trick in Memphis and other cities.  The National Consumer Law Center estimates that there are more than six million contract buyers in the United States now.  More shockingly, more contract sales were recorded in Detroit last year than traditional mortgage transfers.

Organizers with ACORN  and the Home Savers Campaign  have spoken with lower income working families in Philadelphia, Pittsburgh, Youngstown, Akron, Detroit, and other cities as diverse as Memphis, Little Rock, and New Orleans. These conversations reveal huge issues that bring this emerging housing crisis into tragic relief and demand action and response.   The stories are heartbreaking.

A Harbour Portfolio buyer spoke to us from her couch, where she was recovering from a fall on a faulty stairway in Pittsburgh.  In Akron, another Harbour Portfolio purchaser told us about the ceiling in the shower falling on his sister, leaving her unable to work.   A Vision Property Management family in Pittsburgh told us of moving into a house after signing the papers only to find that it had no plumbing or electricity. They were forced to “camp” in their house for six months.  Vision’s callous indifference to the deplorable condition of the housing stock meant that one Youngstown family had been forced to move to a second Vision house because their first was ordered demolished by the city!  Many of the buyers were on Social Security or Veterans payments.  Meanwhile, one Harbour buyer was having problems getting the contract in his name — even though the payments were made from his pension.

Sadly, this story from Philadelphia is typical, as the organizing team’s notes reveal:

Maria Rodriguez and her husband “purchased” the house at 917 Sanger St., in the Frankfort section of Philadelphia for $65,500, almost 4 years ago.  They both worked:  he as a landscaper and she worked at a hotel doing housekeeping. . . .   They put down $2000, plus $465 as the monthly lease payment, $105 for real estate taxes, $30 for general liability insurance, or $2600 as an initial payment and $600 a month. The contract runs until August 2020.  $57.06, +2000 initial option, of the monthly payment is credited toward the purchase price.  Maria and her husband have put about $25,000 in the property because of huge issues like unpaid water bills, no heating or electrical system. They believed that at the end of the contract, in 2020, they would own the property and get the deed.  Instead, they will have paid $6,793 toward the $65000 house price.  On Aug 30, 2020, they have 3 options:  give Vision a check for $58,206, walk away, or convert to seller financing with a new contract for the remaining $58K.  Like all the Vision properties people we’ve talked to, this was a total surprise.

At the end of our visits with working families, we often left people enraged by anger salted with tears.

Laws to protect would-be buyers vary state-to-state, and many are weak. Are these “buyers” tenants, or are they owners without a deed?  Many they cannot connect utilities or get contractors to work on their houses because of the confusion.  Although contracts are required to be filed, they usually are not.   In Green Bay, Wisconsin Vision whistleblowers told television reporters that they were instructed not to pay sales taxes or transfer fees.  The city of Cincinnati sued Harbour for $335,000 of uncollected fines and penalties.

Some cities have taken action. Toledo passed an ordinance requiring contract sellers to obtain a certificate of occupancy and habitability before a contract was executed and a potential buyer allowed to move into a property. Lorain, Ohio, required the same, but only at the point of sale, which sadly may never happen.  In Pennsylvania, lawyers believe there is an “implied warrant of habitability” that should force sellers to make repairs before occupancy.  Other lawyers argue that none of these agreements can be valid contracts because their terms are “unconscionable” on their face.   The Uniform Code Commission is debating offering state legislators a model law to clarify some of the mayhem.

As the Home Savers Campaign and partner organizations get their arms around this issue, one thing is clear: these contracts are misrepresented and rarely understood by working families desperate to obtain affordable and decent housing with the opportunity of home ownership.  Millions of families are now caught in this dilemma. For them, the American Dream turns out to be an American Nightmare.

As our campaign against these predatory practices gains traction and the raw exploitation involved becomes even clearer, and as more working families demand justice, it will be harder for anyone or anybody to deny the exploitation at the root of these transactions.

Real estate is perhaps one thing that President Trump does understand.  The fight needs to move from these houses to the White House.

Wade Rathke

Wade Rathke is best known as Founder and Chief Organizer of ACORN from 1970-2008, and continues to serve as Chief Organizer of ACORN International working in 13 countries.

Special thanks to Gary Davenport, former community organizer and currently with Mahoning County Land Bank for assistance in Youngstown work.  We’ll have more to say about Youngstown as we assemble the data later this summer!

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Heartbreaking Stories of Housing Ripoffs

New Orleans   Meeting with friends and lawyers in Austin, Texas, including my longtime, go-to-counselor for organizational and personal matters, we had stopped briefly on the way to their celebrated annual spring crayfish boil for a cup of coffee and to watch marchers with homemade signs hearing towards the Texas capitol in the name of science. Later in the back patio of the law firm’s offices in a downtown house, while we watched young people take their turns at stirring the four boiling pots filled with crayfish, potatoes, corn, mushrooms, and even sausage, we found ourselves talking about how in the world it could be legal for the contract for deed and rent to own real estate predators to be able to stay in business given their total lack of compliance with local laws or contractual ethics of any kind whatsoever.

We discussed the lawsuit filed in Cincinnati, Ohio by that city to try and collect $335,000 in fines and penalties from Harbour Portfolio, the Dallas-based private equity vulture financier of contract-for-deed sales, and whether or not the company would run from the business. We made plans to challenge any application that the principals might make to acquire banking assets in Arkansas with our organizational allies there.

Where there was no question was that these companies had to be stopped. On the way to the airport, I read a report from Craig Robbins of Action United in Philadelphia who had been part of our recent doorknocking teams in Pittsburgh, Akron, and Youngstown. On a recent call, we had asked him to jot down any stories that we could put on the Home Savers Campaign website from the visits he was making with Vision Property Management, the South Carolina based rent-to-own predator. I opened the email and here is what I read:

Maria Rodriguez and her husband “purchased” the house at 917 Sanger St., in the Frankfort section of Philadelphia for $65,500, almost 4 years ago. Their credit was not that good, so Vision seemed like a good way to pursue their dream of home ownership. They both worked: he as a landscaper and she worked at a hotel doing housekeeping. Contract was signed on 9/1/13 w/BAT Holdings 8, LLC. They put down $2000, plus $465 as the monthly lease payment, $105 for real estate taxes, $30 for general liability insurance, or $2600 as an initial payment and $600 a month. Contract runs until August 2020. $57.06, +2000 initial option, of the monthly payment is credited toward the purchase price. Maria and her husband have put about $25,000 in the property-huge issues when moving in like unpaid water bills, no heating or electrical system. They believed that at the end of the contract, in 2020, they would own the property and get the deed. Instead, they will have paid $6,793 toward the $65000 house price. On Aug 30, 2020 they have 3 options: give Vision a check for $58,206; walk away, or they can convert to seller financing with a new contract for the remaining $58K. Like all the Vision properties people we’ve talked to, this was a total surprise.

Change the names and the listing price and this is the story of Vision – and many companies like it – all over the country. They have to be stopped.

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What Happened to the Push for More Nonprofit Community Development?

New Orleans    Community development corporations, once seen as an important tool for neighborhood revitalization, may not have fallen on hard times, but it has become increasingly invisible in many cities. Partly the strategy, heavily funded and much-touted in the late 1960’s and 1970’s, shriveled as the huge federal funding programs diminished and the ideological dominance of private sector and market-based development suck the money and air out of the development space. Partly the strategy receded as studies like those by David Rusk, former mayor of Albuquerque and something of an urban expert, could not prove that CDCs, as they were called, had been successful enough to make a difference in deteriorating areas, especially compared to gentrification. Many CDCs became more service operators than jobs or housing developers. There were, and are, of course huge exceptions some of them very successful, but there numbers are no longer legion and their record more mixed.

When CDCs were ubiquitous, community organizations were often pushed, carrot and stick, by funders and their own search for stability and institutional status in this direction, building grocery stores, small businesses, community centers, and housing developments. Unions like the Teamsters in St. Louis and the AFL-CIO local federation in San Antonio became known for their senior housing and other services. Churches, as anchor institutions in many cities, tried to take on the task. Not so much anymore. It was hard work, requiring significant resources and managerial skills often stretching organizations far outside of their missions and expertise.

I was thinking about this while in Buffalo and talking to my friend and comrade Bill Covington and hearing about his church and how much they have continued to buck this diminishing trend of abandoning community development by doubling down in Buffalo’s predominately African-American east side and creating something rare, a buffer zone protecting the community from the expansion of the medical center. St. John Baptist and its social conscious isn’t a new thing. They pride themselves on being in the Martin Luther King, Jr. wing of the Baptist Convention and having committed civil rights Reverends Jesse Jackson, Fred Shuttlesworth, Ralph Abernathy, and Al Sharpton speak and preach to their congregation. They started down this trail of community commitment first by creating a credit union, but more recently they have expanded to a community center and school projects, including a charter school, and, most importantly, a clutch of community development corporations focuses largely on reviving and creating affordable housing in the East Side Fruit Belt area.

Their community development corporations consist of McCarley Gardens housing complex which are 150 unit 2, 3 and 4 bedroom tri-level apartments and St. John Tower a 150 unit Senior Citizen unit. The St. John Fruit Belt Corporation is the producer of a $54 million combine of single-family, subsidized housing units and town homes. Listening to Bill Covington on Wade’s World, it seems that they are continuing to break ground on additional affordable housing projects, including more desperately needed rental units. The financing, not surprisingly, largely comes from state, federal, and local pubic sources.

Community development is not for everyone, and it is not a magic bullet for curing poverty and turning around deteriorating neighborhoods, but it makes a difference, and it’s encouraging to see a success story in some faith-based institutions that are still committed to making community contributions and playing a leadership role benefiting everyone, regardless of theology and ideology.

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Bottom Feeders, Home Dreamers, and Big Time Realty Schemers

foreclosureChicago     When neighborhoods are wracked by foreclosures and the abandonment that accompanied the 2008 Great Recession and financial chicanery that popped the real estate bubble, significant studies have documented the loss in value experienced not only by houses on the block, but also houses within a mile away that also lose value. Put enough abandonment together and there is a tipping point that can change the reputation and economic reality of an entire neighborhood. It’s what blockbusting, real estate speculation, federal financing restrictions, and legal segregation did to thousands of urban neighborhoods fifty years ago. It’s also what inadequate foreclosure relief and similar speculation, credit deprivation, and legal indifference has the capacity to do now in thousands of communities not only in urban areas, but also suburban and exurban developments where a lot of the foreclosure crisis was centered.

Working with former ACORN organizers in the Phoenix area in 2009 and 2010 on an anti-foreclosure strategy in close-in Phoenix neighborhoods that had been working and lower middle income, brick, one-story houses, some even with small swimming pools, the foreclosed houses at 35 miles per hour wouldn’t look much different from those that were occupied, but slowing down or walking by, we could identify one in three that were clearly somewhere in the foreclosure process or already vacant. Houses that could have been valued at $150 to $200,000 in 2006 could be had for as low as $25 to $50,000 if a family would have been able to get credit, which was increasingly difficult under the tighter lending standards that accompanied the subprime lending market. The new suburbs of $250 to $400,000 houses 20 miles and more from the city center in the farther edges of Maricopa County were even in worse shape. We had meetings on some blocks where half to two-thirds of the streets were in some process of foreclosure.

Looking at the 153,000 properties in Michigan, Illinois, and Ohio on the RealtyTrac foreclosure list more closely, there were a lot of conclusions that became clearer with more attention. The Fannie Mae dump of these houses wasn’t for pennies in 2012, 2013, and 2014. These were not $1000 giveaways. Yes, many of them were likely substantially devalued from their original purchase price, and that information wasn’t available to us, but we could see that these were not giveaways for the most part, but more market-corrections that could have been achieved if banks had modified by reducing principal to market, rather than forcing foreclosure. Now, in many cases as the houses moved the ones getting to eventual resale often were returning to higher assessed valuations.

The other thing that was increasingly clear is that we were wandering in the land of hopes and perhaps shady dreams more than we were dealing with big timers. Of the 153,000 plus homes, almost 115,000 were acquired from FNMA by individuals, maybe folks hoping for a home, and maybe small timers thinking they might make a buck on the come. Another 9000 or so bought between two and five from FNMA, and they were surely small time speculators, often concentrating on one suburb or city and hoping for the market to recover so they could make a buck. About 60 outfits including the big timer, Harbour Properties, picked up 50 homes or more. It’s worrisome to believe that targeting the big boys might not be enough to catch the small fry and to sort out where the devil might be swimming in the deep blue sea on predatory contract-for-deed purchases as well.

The impacts of all of these real estate plays are somewhat off the radar now, but their impacts in communities, more of which are suburban and exurban that was imaginable decades ago, is going to be huge.

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