The Census and Contracts-for-Deed

Little Rock       One somewhat nagging problem the ACORN Home Savers Campaign has confronted over the last several years, especially when we looked at the frequency of “contracts-for-deed” was the lack of definitive data.  Sure, we knew in Detroit that more contracts-for-deed were being registered under real estate transfers in recent years than were any form of traditional mortgages, but such information was local, not uniform, and decidedly not national.  For some inexplicable reason during the aftermath of the Great Recession in 2008, the Census Bureau under President Obama dropped the question from the 2010 census creating a black hole on a gnawing problem.  We can guess why, but we don’t know definitively.

My comrade and friend, the filmmaker Charles Koppelman, joined ACORN’s “volunteer army” when we were hitting the doors in Pittsburgh in the spring of 2017 trying to get to the heart of these issues with the Home Savers Campaign.  He had his camera rolling when a local Pittsburgh ANEW member and I were visiting with a woman, as she lay on her couch recovering from back surgery, in her home.  At first, she said she didn’t have a contract-for-deed, but the more we talked the clearer in became that she had a 30-year contract with a subsidiary of Harbour Portfolio, that was absolutely a contract-for-deed.  The interest rate was 12%.  The terms were onerous.  The contract was precarious.  If she missed a payment, they could take back the house, and she would lose everything.  Harbour, a Dallas-based hedge fund, had flaunted the fact that it was using such contracts to flip thousands of properties it had acquired at foreclosed property auctions conducted by Fannie Mae and Freddie Mac.  She was ready to organize with the campaign once she got back on her feet.  Charles learned more in talking to us about the situation so knew the information gap created by the Census that was preventing a full understanding of how widespread the return of such contracts might be.

Charles lives in the Bay Area of California.  He sent me a screen shot of something very interesting yesterday.  He had received a Census form to fill out in the mail, and darned if it didn’t have a question – once again – asking whether the household was under a contract-for-deed.  Voila!   Some bureaucrat deep in the bowels of the Census Bureau must have seen the smoke signals about the fact that this often-predatory product is back, and slipped the question back into the queue.

It will help, but it’s no panacea of course.  The visit in Pittsburgh 18 months ago provides that answer.  Too often given the desperation that pushes many families into these kinds of agreements as they search for affordable housing in almost any condition also leaves them uncertain of the details, including what to call the agreements they have signed.  The brokers are often very loose lipped in the way they encourage people to see such agreements as mortgages.  Others agreements that are only different in degree, like Lease-Purchase-Options, Rent-to-Own, Lease-to-Own, etc, etc, aren’t contracts-for-deed that are now actually monitored by Dodd-Frank but should earn a “check” in that Census box as well.

The data won’t be perfect by a long shot, but magically we are somehow back to where we were in 2000 when the numbers were last counted, so on the 2020 Census the inclusion of the contracts-for-deed question is at least something to put in the good news column.

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Land Contract Companies Settle Lawsuits in Cincinnati Without Celebrations

New Orleans     In the more than a year that the ACORN Home Savers Campaign has built committees of owner-occupants in cities in Michigan, Ohio, Pennsylvania, Arkansas, Georgia, and Tennessee to try to force companies to convert land contracts to ownership for the occupants, to renegotiate the terms, and bring homes up to standards, others have argued that the best tactic in dealing with land contracts was through the courts.  Lead lawsuits filed in Cincinnati a year ago have now been settled and provide a template for understanding what relief is possible and what is not, so let’s see what an examination of the settlements provides for the future organizing.

The City of Cincinnati sued both Harbour Portfolio, based in Dallas, and Vision Property Management, based in Columbia, South Carolina.  The suits were based on the condition of certain properties owned by the prospective companies.  The settlements in both cases resolved various fines and assessments involving these properties.  Harbour will have to pay $125,000 to settle and Vision will be required to pay about $88,000.

Going forward the companies are required to record all properties in the future.  They are also barred from entering into any future land contracts until the city has inspected the property to determine that meet minimum code standards.  There was an attachment with a list of properties that Harbour needs to resolve.  In the Vision settlement there were four properties at issue, two of which the City agreed had already been brought up to code and were deemed approved and two that were in process.

Pretty much that’s the bottom line on the settlements.  Pay up, fix ‘em up, and go on about your business.

The one area in which the settlements are completely silent is on the issue of the land contracts themselves and their provisions.   Harbour has been a classic contract-for-deed company in most of its transactions.  After investigations and subpoenas from the Consumer Financial Protection Bureau about their business practices since contracts-for-deed are under Dodd-Frank, the company seems to largely be exiting the market, even though the CFPB has been rendered toothless at this point.  Vision is a lease-purchase-option company where owner-occupants sign an agreement with a term of seven years normally and at the end of that term have credits set aside and the option to then buy the property and refinance.

In the settlement the City and Harbour agreed that a separate disclosure would be given to Harbour occupants explaining that they were in a land contract.  In the Vision settlement the company agreed, regardless of the nature of their contracts, to comply with any Cincinnati regulations that govern the conduct of landlords with tenants.

All of this is for the good, but leaves both companies whole and intact though chastened, and leaves the nature of their contracts affirmed as legal and appropriate business models under state law in Ohio, either because land contracts are covered in the case of Harbour or the law is silent in the Vision situation using lease-purchase-options.  Efforts to amend the Ohio law in the legislature proposed by some seem to not be making much progress and lack Republican support in the bodies they control.  The Cincinnati settlement will be the benchmark by default and gives relief where there are nuisance properties, but leaves the structure of land contracts in various forms untouched, leaving the ACORN Home Savers Campaign with plenty of work to do in our efforts to push companies towards mortgage conversions and different contract and business models.

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