Vision Property Management: Exploiting Lower Income Home Buyers as a Business Model

New Orleans   In writing about Vision Property Management, the predatory and unscrupulous rent-to-own real estate company, reporters for The New York Times obviously struggled for a way to describe where to place Vision and other bottom-fishing realty companies that exploit lower income and working families’ hopes of home ownership. They ended up just talking a walk and euphemistically referring to these operations as operating in “this corner of the housing market.” If it’s a corner, it’s a very dark and nasty place.

Vision, based in Columbia, South Carolina, owns more than 6000 houses, many of them purchased at rock bottom prices from the foreclosure inventory dumped on the market “as is” by the quasi-governmental housing finance giants Fannie Mae and Freddie Mac. The Times described their modus operandi succinctly:

Vision markets its homes on a website, with most of the transactions taking place either over the phone or by email. Sometimes the photos of the properties are several years old and do not reflect what they actually look like.

You’re wondering how that would not run afoul of truth-in-advertising laws aren’t you? I thought the same thing, but to the degree that state and federal laws do not seem adequate to regulate operations like Vision, this dark corner of the real estate market, whether called contract-for-deed, rent-to-own, lease purchase, or whatever, is based on transactions where the “looks” of the place may be the least of the problem. No inspections, no appraisals, and agreements based on condition “as is,” make it easy to hide problems as severe as lead poisoning and roof leaks in Baltimore, lack of water, heat and good sewage in Arkansas, and unaddressed code violations and thousands of dollars in fines in Cincinnati, all of which reporters were able to document from disgruntled and exploited wannabe home buyers. Even a recent photo on the Vision website would not have revealed the horrors that awaited these families – and thousands of others.

As we’ve noted over recent months, contract for deed land purchases, like a bad weed, have grown in the credit desert since the Great Recession for lower income families still hoping to own their own homes. In the wake of these horrible stories of exploitation, some states are finally looking to tighten up regulations. A bill in Illinois is progressing that would give buyers some additional rights, especially once they have paid more than 10% of principal and interest. A bill proposed in Maryland had less luck, as the real estate industry muscled up to prevent reform even in the wake of lead paint poisoning in some of the homes, arguing that over worked and undermanned city inspection teams needed to do better. The Uniform Law Commission is evaluating whether to draft model legislation on contract for deed purchasers in the wake of all of this shame and scandal, but that will also take years.

Exploited home buyers shouldn’t have to crouch in this dark corner of the market waiting for relief. Signing light on the problems is valuable, but this is a situation that cries for action, since the words aren’t working.

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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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Tradeoffs Between Time and Money

timeormoneyNew Orleans   Two professors reported on the results of a study they made about the choices people made between time and money. They reported that people were happier and more satisfied with their lives when they chose to value time over money. They led into the piece by mentioning that one of the economists – a man – faced the choice analytically over spending time over a weekend with a new baby. He was offered a reasonably lucrative opportunity to conduct two days’ worth of workshops across the country which would have helped pay for the cost of daycare and other associated expenses of a new child, or he could have chosen to spent the time at home with the child. We were sort of left hanging on this one, but given their survey result and his argument, he clearly chose time over money.

All of this seems fine and dandy, but it also stops way short of being about reality. To have any real meaning such a study would have to try to determine what the financial benchmark would be that would realistically allow an individual the luxury to choose. Furthermore, there are two edges to this sword when you grab it, but we’ll get to that.

At the simplest level you have to have money in order to choose time. The professor was making a choice on allocation of his resources, but he started with sufficient resources to allow him to have a choice or at least believe that he had a choice and to believe that the consequences of either decision would not have been fatal or painful or face public scorn. And, in fact his time itself had value, as evidenced by the fact others were willing to pay him to expend it. An interesting question for him, as an economist, might have been what level of payment for these two workshops would have established a tipping point where he chose the work and the money, being able to rationalize that it would allow him to essentially purchase more time in the future.

For marginal workers and lower income families all over the world who lack baseline resources, there simply is no choice. If someone shows them the money, they have to go for it. And, in fact there’s another public risk for lower income individuals and families, especially those that get any kind of public support or resources. This is the other edge of the sword. This is the “welfare Cadillac” problem. A significant part of society wants all lower income individuals and families to never have a choice, but to always choose money, meaning work, because they believe against all evidence that work is always available, that nothing is too menial, and that anyone essentially choosing time is stealing their money and should have no choice. When it has to do with women on welfare with children, the same folks might want their wives to stay at home with their children for the sake of the children as their view of a social good, but want to deny such a choice to anyone receiving public aid.

Admittedly all of this was on my mind recently as I spent more than 30 hours in order to travel in one day from Berlin to Amsterdam to Washington, DC to Toronto and then wend my way through rental car hell and pouring rain to my final destination all as the result of a series of decisions solely based on being forced to choose money and assign zero value to time. The pre-dawn train and flight from Berlin to Amsterdam, is what had allowed visits with many activists, organizers, unions, and parities in Hamburg and Berlin in the first place. The cost of the roundtrip to Amsterdam was at the lowest possible cost to allow a peoples’ party to marshal its resources and the last and cheapest flight to Toronto and the cheapo 24-hour EZ-Rental Car operation was about saving every looney and toony for ACORN Canada.

Are people really happier with time rather than money? Sure, if that have enough money to start with and the right to make a choice in their best view of their interests. How many people are excluded from the right to make such a choice? Without that information, it would seem the conclusions are both irrelevant and trivial.

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Hot Check Court Another Debtors’ Prison for the Poor

Sherwood's Hot Check Court Arktimes

Sherwood’s Hot Check Court arktimes.com

Little Rock   My brother-in-law and I agree on a million things, but those are family things, construction projects, upkeep of my trailers, automotive advice, and fixing anything and everything, but we do our best to NOT talk about politics, because he’s what you might call a Huckabee-man in Arkansas terms, and I’m anything but. We know where each other stands, so we know how to walk around most of the rocks in the road. This morning at dawn before I pulled out he said, “You got to see this!” He was following the news on Facebook, so I went over and looked over his shoulder where he was pointing. “Do you know about the “hot check” court? They’re running a debtors’ prison over in Sherwood.” I was all no, yes, and out the door. What the heck was a “hot check” court?

He was on to something though. Out of curiosity, I googled hot check court in Sherwood, which is a suburban enclave in Pulaski County across the Arkansas River and up the road from Little Rock. What you find with Google’s help is that, yes indeed, the City of Sherwood actually has a “Hot Check Division” of the Sherwood District Court of Pulaski County. How could it be that this little town has enough hot checks to have its own division? Are people driving from all over the county, the state, and the South in order to try and pass hot checks? The answer is, yes, sort of.

What had caught my brother-in-law’s eye was that the ACLU and the Lawyers’ Committee for Civil Rights Under Law had joined to file a suit for several defendants over the practices of this hot check division arguing that they were effectively running a court as a money printing machine exploiting low income defendants by larding on fines, court costs, and penalties connected with the original offense to milk the defendant and when they couldn’t bleed them dry, they were jailing them to keep the system going. The lawyers weren’t shy about referencing how similar this Arkansas mess was to Ferguson, Missouri where this was a system on steroids. They were also quick to mention that the Justice Department had jumped in and sued several venues around the country for using minor infractions as cash machines for their towns and cities.

In a report by the Associated Press one plaintiff is a good example of this system:

The plaintiffs in the case include Nikki Petree, a 40-year-old Arkansas woman who has been in jail for more than 25 days because she was unable to pay more than $2,600 in court costs, fines and fees related to a bounced check she wrote in 2011 for $28.93. According to the lawsuit, Petree initially faced $700 in court fines, fees and restitution, but the amount ballooned over the years due to related failure to appear and failure to pay charges.

The City of Sherwood of course denies everything. Their claims though seem hollow. They argue that it is only after the third or fourth hot check that they jail someone, and that they offer payment plans to resolve the earlier problems. I’m sure no one has every bounced a check, which is what a hot check is, essentially an NSF or non-sufficient funds matter, but these days if you are on not on top of your balances or a deposit goes bad, you could bounce a half-dozen checks in one sitting, bing, bam, boom! And, the City is in cahoots with the County, because Pulaski County has been sending over hot checks for more than 40 years to Sherwood to crank this ATM for them.

The AP reports that this adds up to a pretty penny.

The groups say Sherwood relies on the hot check fines and fees as a significant revenue source for its operations. The city’s receipts from district court fines and forfeitures were estimated to be at least $2.3 million in the 2015 fiscal year, Sherwood’s third-highest revenue source after city and county sales taxes, the lawsuit said.

Before you start South-bashing and pretending that this is just something you find in the backwoods or in broke-ass states like Arkansas, the lawyers are clear this situation exists in a lot of counties around the state for sure, but all of us know that this is common increasingly all over the South and the country, and certainly not confined to Missouri, Arkansas, North Carolina, and other places that have been in the news for creating modern day debtors’ prisons on the backs of the poor in order to avoid fair taxation and harder political choices.

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If PayPal Billionaire Thiel Wants to Fund More Lawsuits, Here’s a List

Hulk Hogan with Thiel paid for counsel at trial

Hulk Hogan with Thiel paid for counsel at trial

Little Rock    Paul Thiel, the libertarian billionaire, co-founder of PayPal, board member of Facebook, and venture capitalist, Trump delegate, and Silicon Valley community leader, went public about the fact that he is the money bags behind the Hulk Hogan lawsuit that is trying to put the on-line scandal and news sheet, Gawker, out of business. He says the price tag is in the range of $10 million to the lawyers so far. He swears it is not just for revenge over a now defunct Silicon Valley blog that had outed him in 2007, but more about privacy and setting limits on scurrilous press abuse. He had referred to the Gawker blog previously as the Al Qaeda of journalism or words to that effect. He was not a fan. Observers knew there was an angel behind Hulk and his lawyers when they agreed to let the insurance company for Gawker off the hook. In wrestling, they would call this a “death match.”

With a billion dollar bank account he very accurately described himself as having the resources to defend himself and noted that that was not always the case for many others somewhat slandered in one way or another. He also says that he is financing other litigation as well but didn’t reveal it. He was educated as a lawyer himself, and supposedly asked a team of legal beagles to find some areas where he could make a difference at this interesting juncture of self-described philanthropy, vengeance, and politics.

Dude, where were you when we needed you a couple of years ago when ACORN was fighting for its life over the unconstitutional Congressional “bill of attainder” in 2009? Well, never mind there are always other issues, and I’d encourage brothers and sisters everywhere to make a list and send it over to Thiel so his team can saddle up and defend our liberties and lives as well.

You take the recent report for example by ACORN International and its partners about the lack of democracy and diversity in membership-based, rural electric cooperatives. I’ve talked to one lawyer after another who are convinced this ought to be against the law, and I’ve even tried to track down lawsuits that have recently been filed in Alabama on this issue, but it’s one of those Gordian knots where I can hear my friends on the other side of the phone kind of sighing because they know it’s wrong, they suspect it’s illegal, but who has the time or money to wage such a fight. A colleague send me a picture of the all-white, male, mostly elderly board of the Mississippi land bank supposedly soliciting interest from all the farmers out there who might want loans. A lot of them can look at the board makeup and not bother, but is that legal. I guess I’m sighing now!

Or how about the discrimination against the poor on getting their tax refunds at the same time as everyone else if they happen to qualify for an earned income credit? Going after the taxman, isn’t that a libertarian issue, too?

Or how about all of this voter mischief? A federal judge in Ohio allowed people to register and vote on the same day, declaring the effort to prevent such activity was discriminatory to black voters. There’s a lot of that and rollbacks on voting rights in one state after another. Voting is equal to individual liberty isn’t it? Sounds like someone financing more of these lawsuits would be a good libertarian philanthropy.

Hey, pile on! If this isn’t just a piece of Silicon Valley revenge, there’s a long list of injustices where some cash could help us get some of these issues before a judge and settle some scores for millions.

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Congress Discriminates Against the Poor on Tax Refunds

tax refundNew Orleans  This one caught me by surprise. Congress managed to sneak through a provision in the tax-cut deal at the end of 2015 that both punishes the poor and privileges predatory products long targeted and increasingly scorned by banks and tax preparers.

What’s the deal? Beginning in the 2017 tax season, the new law will require the Internal Revenue Service to delay until February 15th or later sending any refunds to lower income, working households that have qualified to receive an earned-income tax credit or a child tax credit. According to an article in The Wall Street Journal, in 2014 by about the same time of year, the IRS had already issued more than 29 million returns for $94 billion.

What could Congress be thinking in this move other than to punish the poor and help the predators? Well, they are claiming that because the administration wanted to expand such tax credits, they want to give the IRS “more time to analyze W-2 forms with wage data from employers before issuing refunds.” Congress claims this will supposedly save about $78 million per year. What’s the math there? Well, by forcing millions and millions of lower income, working families to wait for their desperately needed returns or fall into the jaws of the predators, Congress will stop supposedly fraudulent returns that their own math indicates only amount to .00083% of the total. What is that eight one-thousandths or something? Face it, a miniscule number compared to the damage that will be done! In the same day’s Wall Street Journal there was a report that a rich Dallas family lost its case over hiding more than $1 billion in offshore accounts. That one family will pay three or four times the amount that will be saved by hurting millions of lower income working families.

Meanwhile, ACORN and other groups managed to curtail refund anticipation loans by H&R Block, Liberty, and Jackson & Hewitt and get major banks like HSBC and others to stop loaning money to these outfits and others to provide such predatory products, partially because of what one banker told me flatly had become “reputational risk.” Even the Consumer Finance Protection Bureau in recent years has climbed on this bandwagon. Now, it will be wide open for business again at 350 to 400% effective interest rates as lower income, working families who file early and wait anxiously for their refunds climb into the clutches of the predators for the very simple reason that they need their money and they need it now. It is “their money” remember because it is a refund and tax credit, hailed by all US presidents for decades now as one of our latest and greatest antipoverty programs for working families. Congress will punish the poor for 8 one-thousandths of “maybe” savings, so that the tax preparer predators can make billions once again singing the old song now.

This is the same Congress that has punished the IRS by cutting more than a billion from its appropriations forcing layoffs of tens of thousands of IRS workers, so the notion that the IRS has the capacity to even do this new job is absurd. Part of the beef from Congress is that the IRS has used technology to more rapidly issue refunds, essentially shortening the time frame the predatory tax preparers were arbitraging on the refund anticipation loans. They are claiming this is all about identify theft. There are simple tests that can be baked into the technology to verify identity as well, much more easily that delaying millions of desperately needed returns. This move by Congress is punitive pure and simple.

How is this “due process” under the 5th amendment of the US Constitution when only the tax refunds of poor workers are being stalled and not the big time fraudsters among the one-percent? We’ve got the plaintiffs by the thousands, where are the lawyers willing to stand up for the working poor these days?

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