Harbour Portfolio Contract Purchase “Buyers” Are Either Mad or Scared

Akron   They may spell Harbour with a “u” in a head fake to make you think this is a high-class operation from London or something, but when you are dealing with Harbour Portfolio, it’s just a Dallas-based private equity operation with Wall Street roots, that leaped down into vulture financing to buy thousands of FNMA foreclosed houses. What makes them different though is that they have flaunted the fact that they were going to try to make their bucks by off-loading the homes using contract for deed land purchase agreements, which most people in Ohio and Pennsylvania just call rent-to-own, though they are a bit of a different animal.

The ACORN teams on a doorknocking blitz this week starting in Pittsburgh, then Youngstown, Ohio, finished with two teams hitting forty doors in a cumulative ten-hour sprint in Akron. Over the three days, we may have put the flesh to the wood on close to 100 homes. We wanted to listen carefully to what people were saying to understand how their experience with these high-risk and often blatantly predatory home purchase schemes were working out for them. We learned a barrel full and met some great people, and the week was invaluable in allowing us to finally get our arms around this campaign after surrounding it with almost four months of researching property records, looking at agreements, and getting a sense of the field and its cast of characters.

With few exceptions, people wanted to talk to us because they were as confused and uncertain about the fine print on their contracts and agreements as we were. They knew they wanted to buy a house and for the most part thought this was the only way they had a chance, so dove in and hoped they would never hit bottom.

One of our teams though talked about part of their conversation as the “angel of death” piece of their rap where they felt like they were giving people the news that they very likely would never going to own the house. My team was more gingerly, and as my doorknocking partner said to one Harbour Portfolio contract buyer with four years into the deal that we would like to go over the contract with them to make sure they would own the home at the end of their agreement, she looked us in the eye, and said that she also was scared that the contract would really never end up with a deed.

On one of our visit Harbour Portfolio visits in Akron, we started after identifying ourselves and asking the confirmation question about whether the man had a contract with Harbour. He quickly came to the steps saying, “You mean Harbour Portfolio!” He was mad about every part of his experience with Harbour. A bathroom ceiling had fallen down on his sister causing $1400 in repairs, and, worse, hurting her so badly she wasn’t able to work. On our first Harbour visit in Pittsburgh, we had been ushered into the living room to talk to the owner who was confined to the couch, recovering from surgery on a fused disc in her neck. Later in the conversation it turned out faulty steps in the house had caused the fall. To say some of these homes are unsafe for their new contract buyers is not speculation, but a statement of fact.

There was confusion about the contracts from start to finish. One owner noted that somehow they had allowed his sister to sign, rather than him, confusing the family and the potential ownership. Another was sure she had a mortgage despite the fact that she was paying National Assets, one of Harbour’s servicers, had only paid $1500 as a down payment on what she knew as a double-digit rate of interest and thought would cost her $100,000 before it was over on a home she knew Harbour had bought for $13,000. She finally agreed it was not a mortgage, when she recognized the term “contract for deed” was on her agreement after we mentioned that kind of instrument. Another had gone through three servicers already. None of the terms matched. One was paying insurance directly and having problems with Harbour telling her they were also paying for the insurance through them, and had been unable to stop the double payments.

None of this was “let the buyer beware,” so much as all of it was “make the buyer scared!” Every Harbour buyer we met was holding their breath that they would own these homes on a hope and a prayer without any real grip on their contracts and even a scintilla of belief that Harbour was dealing with them in good faith.

Several of our team were veterans of ACORN’s many anti-predatory lending campaigns so for some of them it seemed like déjà vu all over again. The only exception was that these contract purchase and rent-to-own schemes were so much worse. In those deals, most of the theft was on the level of the interest, points, and fees. Here it’s everyday pocket pinch on homes built on hopes and often crumbling around them.

Please enjoy Willie Nelson’s He Won’t Ever Be Gone.

Thanks to KABF.

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Vision Rent-to-Own Buyers in Ohio are Confused and Unhappy

Youngstown  Where we had four ACORN doorknocking teams in Pittsburgh, we only had two in Youngstown, Ohio, but that seemed right since with hardly 70,000 inhabitants now, Youngstown was less than one-fifth the size of Pittsburgh. Putting the lists together at the Youngstown Public Library and the second-chance Café Augustine, run by the Catholic Diocese in space there, our list of homes with various forms of contract land purchases kept growing like weeds. We had too many choices and too little time. Focusing our work just on Vision Property Management, which had been the source of so many complaints in Pittsburgh, we found ourselves with more listings in Youngstown that we had in all of Allegheny Count which dwarfed its size. We had a tiger by the tail it seemed.

Youngstown people are nice. We were met with curiosity and courtesy everywhere. Unfortunately in talking with Vision customers, hoping to be homebuyers, we were also met with confusion and uncertainty from everyone when it came to understanding their contracts with Vision. Many of the stories resembled each other, but none of them were the same. What we thought we understood from our many visits in Pittsburgh was often modified and amended in ways both subtle and significant in the almost twenty doors we visited in Youngstown. Mostly, people hoped they understood their contracts, but they could rarely put their fingers on them while we visited, so we were all like the blind men touching the elephant and trying to describe it to each other.

The most poignant visit was with a man who did have his contract, was convinced that he would have paid off Vision in seven years and would own his own home outright, and was in shock and disbelief as our team worked with him paragraph to paragraph to show him that after paying almost $20,000 in 7-years he would own nothing, but the right to make three choices that Vision offered at that juncture. Since the company was only counting a small part of his monthly payment towards the purchase price, he could make a balloon payment of $15,000 or so and get the deed, which he said was an impossibility for his income and credit. In a second choice, he could walk away from the house and lose his equity, down payment, and the money and labor he had already sunk into repairs. Or, in a final choice, he could keep paying on the same basis for another 15 or 20 years hoping to still own the house. This isn’t a lady or the tiger choice, but more like a choice between the devil and the deep blue sea. The wannabe homeowner was near tears and our team had to try to put a smile on the horrible face of Vision Property Management, not as an act of organizing, but as a simple act of humanity.

As we debriefed at the end of our day on the doors, we found ourselves grabbing at straws. One woman told us she had muscled Vision into an agreement that she would own the house in six years. We hoped she was right, but didn’t see the contract. Another man was convinced he could mortgage the house after his seven years. We hoped with him that there would be an oasis springing up soon in this credit desert. One man told of having been given a couple of weeks to catch up on his payments when he forgot one to prevent eviction. Another man told us he was in this Vision rent-to-own property for the last year after his previous Vision contract had been demolished, and Vision had let him choose from where to try again from their website. A woman said she was given three months to catch up on her payments once.

We found ourselves looking for light at the end of this terrible Vision tunnel of heartbreak. As horrid and predatory as the Vision contracts seemed, the company also seemed hesitant to let someone spit their hooks. If people were able to organize, hear each other’s stories, and take action, they just might be able to force Vision to change their contracts and terms. If some people could force small concessions with their anger, if they came together to fight in the campaign, they might be able to force Vision to buy into their vision of themselves as homeowners, rather than as simple fodder for the company’s exploitation.

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Doorknocking Home Buyer Victims of Contract Buying Scams in Pittsburgh

Pittsburgh   The more we researched the revival of contract for deed land purchases in places from Memphis to Chicago, Detroit to Philly, and the rapidly spreading, predatory scam involving rent-to-own agreements, the more it became obvious that we had to get on the doors and listen to what people were saying who were living in these houses and facing the daunting odds and brutal gauntlet to home ownership. ACORN assembled a team of veteran organizers from Philadelphia, Boston, Brooklyn, and New Orleans to rendezvous in Pittsburgh to partner with our affiliate, ANEW, and its great leaders and staff, to begin a doorknocking blitz in three cities in an organizer’s version of a listening tour and an exploration on whether or not there was potential heat and traction for a Contract Buyers Campaign or whether or not families signing these agreements were happy campers.

Actually, camping did come up quickly in one of the first visits in the team I was with, but happy was never ever mentioned. When we got up the steps a gate blocked the porch that said “Do Not Enter,” but after I tapped on the window, a woman came out, and when I said we were talking to people who had experience with rent-to-own purchase agreements, she waved us all into the living room, sent the children scurrying so we could sit, and she had her partner start the conversation saying they had had nothing but trouble in buying the house, and then proceeded to detail years of trials and tribulations with Vision Properties, based in South Carolina and this scheme. From the day they signed the agreement and even before moving in, they discovered someone had kicked in the back door and stripped the electrical wiring and the plumbing. They called Vision, asking them to take responsibility, and Vision said they were on a triple net lease, and it was all on them, so in their words the first six months they “were camping in the house.”

That was four years ago so the situation has improved, but their relationship with Vision remains poisonous. They had paid $1000 down payment for a house Vision said they were selling on this basis for $20,000. The first five years though their monthly payments would be $300 per month with 30% supposedly going towards what they described as an additional down payment, which would add another $6000 to their down payment. They weren’t able to put their hands on the agreement to show us, but supposedly only then would they start really purchasing the house from their understanding. We didn’t bother them with the math, not wanting to be bad news bears, but the numbers were already shocking. In another year, they would have paid $7000 on something Vision was calling a down payment and another $12000 in rent to Vision, which clearly despite having an ostensible rent-to-own agreement was not adding up to any payments on the principal, even though at the end of their first lease term they would have paid $19,000 against the value of a $20,000 house. They had put another $5000 into the place, not counting their countless hours of labor, and felt fortunate that the borough inspector was working with them on a problem with the sewer line in the other half of their house which everyone involved knew was going to cost thousands to repair. Without any of us saying it, they knew and we knew, that Vision was likely going to be telling them after five years to keep paying this so-called rent with only a piece of it going towards a deed at the end of their rainbow. Oh, and don’t think for a second that Vision is smiling yet as they giggle while walking to the bank. While changing jobs as a housekeeper in a Pittsburgh motel this last December, they were late on one payment and Vision gave them a 7-day eviction notice which they only avoided with a phone shouting match and a double rent payment of $600.

When I asked if they were ready to come to a meeting in a couple of weeks, there was a quick yes from both of them. Were they prepared to bang on the table and shout their protests? Hell, yes, was the response. They had tried to post warnings to others on Facebook about these scams. They had been talking about running for the borough council to make them listen.

This was just one story from the doors.

It wasn’t exceptional though. It was typical. There was resignation and understanding from every family that they were caught in a scam, but in the common conflict of predatory transactions, all of them had been desperate for affordable housing and some way to make something their own, took the gamble with their eyes open, hoping for some good faith, and now were reaping the whirlwind with anger and frustration and looking for justice and ready to embrace and take action with an organization willing to allow them to fight.

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Predatory Contract-for-Deed Sales Cast a Long Shadow in Chicago

Picture featured in the December 1968 edition of the Jesuit Bulletin.

Picture featured in the December 1968 edition of the Jesuit Bulletin.

Chicago  Sometimes it felt like fifty years ago.

That’s only partially because sometimes the conversation would toggle back and forth to the work the Contract Buyers’ League did on Chicago’s West and South Sides decades ago from 1967 to 1972 or so, as strategies and tactics that would address the current, horrid, predatory comeback of contract-for-deed purchases were compared to the old campaign in a day long and continuing conversation between CBL veteran organizers and leaders, contemporary activists, and concerned community and clergy. It is also because we were literally sitting among the remaining survivors of the ghettoization and depopulation of North Lawndale and Austin as we met in beautifully paneled rooms in one rectory in Lawndale and slept in the former rooms of long reassigned priests in the empty floors of another rectory in Austin managed by one priest now, where eight had once lived.

Real estate manipulation, financial exploitation, and banking and institutional abandonment and racism built these 21st Century neighborhoods, even as we examined the great battles 50 years ago that were heroic without being a turning point and sat among the beautiful architectural and institutional ruins of that time. Contract-for-deed purchases are a way that a seller buys distressed property and then exploits a buyer, a family, almost invariably low-and-moderate income and too often minority, by flipping the property without making repairs while extracting predatory payments at huge premiums almost hoping for a default since there is no equity and a quick eviction process, since there was no actual property transfer, allowing the seller to sell again to another victim or another greedy seller, and keep the cycle going again.

The Contract Buyers League was a campaign, spearheaded by Jack Macnamara, a former Jesuit seminarian then, who sat with us today, and a steady stream of almost eighty college students who did stints in summers and school semesters off-and-on for years as volunteers to staff the research, hit the doors, and help the members put together the weekly Wednesday meetings and constant diet of pickets, actions, and events. Around the table were some of those former students, including by old friends and comrades-in-arms from ACORN, the SEIU, and AFL-CIO Mike Gallagher from Boston and Mark Splain from the Bay Area as well as Jim Devaney, a former volunteer from Cincinnati. A former Black Panther from those days and other community leaders now tried to puzzle out how, with the reemergence of contract-for-deed activity now in the wake of the foreclosure crisis and home lending desert for lower income and working families, we might be able to refashion a Contract Buyers campaign that could work and win now.

It goes without saying that today is different than 50 years ago. Rather than being concentrated in neighborhoods like Lawndale and Austin in Chicago and other cities with large minority populations then, today the victims are spread throughout the metropolitan area. We looked at a sample list of contract buyers acquired by two vulture hedge fund operators and there were few in Chicago itself compared to working class suburbs and developments like Homewood, Hoffman Estates, and Orland Hills. How would we get the density that put hundreds in a room on a weekly basis 50 years ago? Estimates are as high as 7 million families who are under contract-for-deed agreements now nationally, but putting them together wouldn’t be easy. We were all veteran door knockers, but we talked about how to use data files, voter lists, robo-dialers, social media, and other tools to flush out the victims and leverage the public policy and political space to create change.

There’s more work to be done in coming days, but two things kept returning us to the task of today. One was hearing our new friends from these communities where we were meeting talking about how their father’s and grandmothers had bought and raised their families in contract houses. Another woman speculated that the mystery of how her sister had lost her house might have been through a contract-for-deed rip-off, and she left at the end of the day to call her and finally ask. And, then there were the stories of the actions, lawsuits, and even some victories of 50 years ago to continue to remind us that we could only really lose, if we refused to fight this plague once again.

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Realtors and Redlining Destroyed Neighborhoods – Was Alinsky a No-Show?

redliningNew Orleans   Looking into the rising return of the family crushing and neighborhood killing predation involved in contract-for-deed property transactions being revived by Wall Street veterans and facilitated by weak regulations and federal off-loading of foreclosure inventory from the real estate bubble of 2008, I stumbled onto an interesting book, Family Properties:  Race, Real Estate and the Exploitation of Black Urban America by Beryl Satter.  Published in 2009, Satter is not only a historian and chairperson of that department at Rutgers University, but has skin-in-the-game, since she was driven to the subject to understand the conflicting family story of her own father who died when she was a child and whether he was a crusading civil rights lawyer and advocate in Chicago or a slumlord himself.  

            Being only half through the book so far, I can’t definitively answer her question, nor have I arrived in my reading to the sections on the Contract Buyers’ League, which was central to my motivation in uploading the book to my Kindle.  On the other hand, I’m knee deep in an excellent, well-written, and researched history that puts race and real estate speculation squarely at the heart of urban neighborhood deterioration from the post-war decades until our current times.  In Little Rock, where I first ran into contract-for-deed exploitation, it was always clear that if there was a power structure anywhere in the city it was centered in the real estate interests, and from our 1972 campaign to “Save the City” forward, including forcibly confronting blockbusting in the Oak Forest neighborhood, they were our main opponents.  In that sense, Family Properties was a deep affirmation and an extension of the argument and those experiences across the urban battlefield of America.

            Somewhat unexpectedly though, I’ve found nothing subtle in Satter’s critique, and condemnation of Saul Alinsky and his community organizing in Chicago during those years.  She bells him repeatedly, beginning with his antipathy for organizing the poor, who were most exploited by all of these practices, and for his inability to strategically and tactically embrace the reality of race in his organizing and the practices of the organizations they built in Chicago.  She doesn’t argue so much that the problem was direct racism, as more fundamentally a weakness in the Alinsky organizing model itself, saying that

“…ineffectiveness of the OSC [Organization of the Southwest] and TWO [The Woodlawn Organization] highlighted the two major flaws of Alinsky’s model of organizing:  his insistence that organizing efforts be fully funded before they could be launched, which left him vulnerable to pressure by the wealthy donors, and perhaps more serious, his belief that they should tackle only issues that were ‘winnable.’”

Sharpening her point she argues that, “Unfortunately, Alinsky’s insistence on fighting only for winnable ends guaranteed that his organizations would never truly confront the powerful forces devastating racially changing and black neighborhoods.”  Ouch!

            She piles on evidence to the extent that her arguments are almost irresistible, include his scolding of his lieutenant, Nicholas von Hoffman and others, for getting too involved in real estate issues when he was in Europe, that he thought were jeopardizing organizational funding, his opposition to fighting black displacement in Hyde Park, and his view that fighting “racial discrimination that lay at the root of community decay…was ‘too complicated.’”  Satter adds that,

“Alinsky often cast urban renewal as an ‘unwinnable’ issue to be avoided.  TWO’s attitude toward housing was similarly confused.  The group apparently felt that the redlining policies that forced black Woodlawners to buy on contract were too complex for effective community mobilization.”

Satter even cites Alinsky’s own biographer in the claim that killing the Square Deal campaign was done on a totally transactional basis,

“According to Alinsky’s biographer, the Square Deal campaign was ‘intentionally terminated by Alinsky and von Hoffman’ because TWO wanted the financial support of merchants when it turned to ‘larger issues such as urban renewal.” 

Twisting the knife, she adds,

“The net result was that, instead of blazing a new path for community activism, TWO became yet another demonstration of the perils of reformers’ financial dependence on the very people they needed to challenge.”

            Adding insult to injury she argues that the creation of the West Side Organization and its achievements were “an overt challenge to Alinsky, who had warned him against organizing the very poor – an action that Alinsky believed would divide the larger community.”   During the Southern Christian Leadership Conference and Martin Luther King effort to take the civil rights movement north, she includes an assessment from one of the movement’s legendary organizers that was equally devastating, quoting…

“…James Bevell, a charismatic Mississippi-born African American who had participated in virtually all of the major Southern civil rights crusades.  In Bevel’s view, too, Alinsky ‘simply taught how to, within the context of power, grab and struggle to get your share.’”


            None of this is definitive, but it’s a critique that has weight and can’t be ignored.  Having organized and fought redlining, realtors, and neighborhood deterioration for decades, as organizers we may have to confront whether or not Saul Alinsky, as a primary architect of community organization, was not only a no-show when it mattered in Chicago, but abetted the problem by skirting the battlefields that counted, by not using issues to build power for the bigger fights, but instead running from the fights themselves.  If that’s the case, the legacy of that shadow could still be crippling the work that needs to be done in addition to the way the work is done.

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Predatory Home Buying through Contract-for-Deed is Increasing

780c1b060773287590e252e572a03ba3New Orleans   Every report indicates that predatory practices are spreading when lower income families are trying to acquire homes in the current real estate market where banks have cut back on small loans, the subprime lending market has virtually disappeared, and vulture investors are trying to exploit the situation. The terrible result has been an increase in contract-for-deed purchases, if you call them that, of houses throughout the country.

RealtyTrac estimates that since 2009, there are at least 20,000 homes being purchased annually through contract-for-deed understandings and the number is rising. The National Consumer Law Center in a report published in July of this year called “Toxic Transactions,” estimates the number of contract-for-deed purchases at 3.5 million homes, but carefully argued that the number was likely much higher. Other experts have placed the figure higher than 4.1 million. This level of exploitation is a national crisis.

Several reports in the New York Times and the Washington Post have documented the increase of these kinds of transactions, particularly noting the fact that several hedge funds have swooped in to make bulk purchases of thousands of foreclosed homes in order to flip them into contract-for-deed agreements to drastically increase their return. Harbour Portfolio Advisors from Dallas was most notorious for purchasing 6700 homes from Fannie Mae in this way for an average of less than $10,000 per property and working with its servicer, National Asset Advisors of Columbia, South Carolina has been in the process of flipping them. The Consumer Finance Protection Bureau has reportedly stepped up its investigation of complaints on these home contracts, and not surprisingly both Harbour and National Asset have thus far refused to comply by providing documents. The NCLC report argues heavily for action by the CFPB to rein in the abuses common in contract purchases.

Contract-for-deed purchases have a sorry history that dates back to the racist government approved redlining of minority and low income neighborhoods before the passage of the Community Reinvestment Act in 1978. Little has changed though since many of these land installment purchases are opaque and outside of the reach of most federal protections currently and often totally unregulated in states as well.

The NCLC report is clear about why the odds are against the lower income buyer in every situation:

 

These land contracts are built to fail, as sellers make more money by finding a way to cancel the contract so as to churn many successive would-be homeowners through the property. Since sellers have an incentive to churn the properties, their interests are exactly opposite to those of the buyers. This is a significant difference from the mainstream home purchase market, where generally the buyer and the seller both have the incentive to see the transaction succeed.

I can remember meeting African-American families on the doors with ACORN in the early 1970s in Little Rock who had been paying on contracts for decades, even starting over in some cases and losing homes they had tried to buy this way. We keep thinking that we have cut the head off of these snakes, but somehow they reappear and victimize more millions.

Real estate, hedge funds, Wall Street, a property-mogul president, racial and income discrimination across the country in the wake of the real estate crisis to me all adds up to a campaign dying for action, and something that we could absolutely win, if we acted together and did so now.

***

Please enjoy Timothy B. Schmit’s Red Dirt Road. Thanks to KABF.

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