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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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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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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