The Confounding Contradictions of Detroit’s Land Contract Houses

Detroit   It was a rough day on the doors in Detroit. One team recorded 14 abandoned houses out of the 17 on the walk list. Remember that these were all homes according to all available records that are owned by one of the big three land contract companies operating in the city: Harbour Portfolio, Vision Property Management, and Detroit Property Exchange, the only local outfit. Another team had eight on its list, and we had six on ours. The math is unsettling and profound, meaning that more than half of the houses these companies owned were abandoned and therefore open wounds bleeding on their blocks, neighborhoods, and community.

There were three dumpsters in the driveways of the abandoned houses our team visited and a trailer at another with a couple of bags of trash on it, but no signs of workers or work being done at these locations. At one location that we marked as “not home,” because the neighbor across the street told us that there were people going in and out of there and work being done, who knows what the story might have been, but the impression from the other locations on our list, left me wondering if these were dumpster “decorations,” rather than construction sites. We were roughly, and it was often rough, in central Detroit, if there’s such a thing, while one team was on the East Side and another was on the West Side. They reported no dumpsters and signs of construction on the abandoned houses on their lists. Don’t get me wrong, the land contract houses were absolutely not the only abandoned houses, and we saw abandoned houses on our route that were not not on our list but had signs offering them for sale, if one could call it that, or auction, with come-on’s hawking $400 a month down payments and lures advertising opportunities to flip the homes or rent-to-own more cheaply that buying. Once we were back at the offices of the historic and giant Ford Motor based UAW Local 600, which had opened their doors to the Home Savers Campaign for this project, we discovered, to no one’s surprise at this point, that both of the names on the signs we saw were simply other eye-candy LLC’s that were part of Detroit Property Exchange.

rent-to-own signs from Detroit Property Exchange subsidiary

Visiting with people, the contradictions are confounding. Our first visit was a woman with had just completed a contract with DPX as locals call Detroit Property Exchange, though her house had been listed under their French Sirois subsidiary. She had been in the home for 12 years and dutifully paying off a mortgage, until two years ago. She was informed then that DPX had bought her home by purchasing a $6000 tax lien. She had being paying everything in the usual bundle to her mortgage servicer, who had gone bankrupt and not paid her taxes, so Wayne County had put her in play without any notice. DPX gave her a contract to buy back the house for $20,000 while paying $750 per month as part of a lease to live there. She was happy because she had managed to pay them off in 18-months, partially by taking advantage of two “matching” opportunities, one at income tax refund time, where they had matched her $2500, and another a month or so later when they matched her $1000. She was proud of herself for getting them off her back and saving her house, but the math still adds up to street-side robbery. She had paid DPX $16,500 on the contract plus another $13,500 in rent, or whatever you might want to call it, so they had $30,000 from her in a year-and-a-half by stealing her house from the taxman when her mortgage servicer went belly up. The day before another team had stumbled onto a similar case, so this woman’s story is, tragically, too common.

Vision Property Management lockbox on abandoned hous

All of these contracts are predatory, though and people were being ripped off right and left, but one home we visited we talked to the brother on the porch, who was apologetic that he had not gotten his act together to buy a house, while both of his sisters had just done so, though we knew this sister was on a rent-to-own contract with Vision Property Management and suspected that was the case with the other as well. Earlier in the morning, I had briefly addressed more than 50 people in the regular meeting of the Detroit Action Commonwealth at the Capuchin Soup Kitchen. People there knew about land contracts, and they knew ACORN, so I was in good company. After a brief explanation of what the Home Savers Campaign was there were questions flying from the crowd. One caught me up short and has left me thinking more and more about these contradictions. A young man said he was on SSI payments of $750 per month. His question: how could he get one of these rent-to-own houses?

Detroit Action Commonwealth Meeting

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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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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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