Tuesday, April 25, 2017

City of Cincinnati Declares War Against Nationwide Real Estate Investor Groups That Use "Predatory & Unconscionable" Contract For Deed, Rent-To-Own Arrangements To Peddle Dilapidated, Violation-Infected Money Pits To Poor, Unsophisticated, Credit-Impaired Homebuyers Desperate To Own A Home

In Cincinnati, Ohio, The New York Times reports:
  • In recent years, private investment firms sold foreclosed homes on high-interest installment contracts to poor Cincinnati residents who could not get traditional bank mortgages.

    Now, the city is cracking down, calling those who offer such deals “predatory” actors targeting the “unsuspecting and vulnerable.”

    In a sweeping lawsuit, Cincinnati took aim at one of the nation’s largest sellers of foreclosed homes, Harbour Portfolio Advisors, saying that the firm owes more than $360,000 in unpaid fines, fees and violation notices. The firm failed to properly maintain dozens of homes, the city claims, leading in one case to a child’s testing positive for lead poisoning.

    Cincinnati’s move against Harbour follows a series of articles in The New York Times last year that detailed how the new market has become a money trap for many poor families. Lucy Morris, a lawyer for Harbour, declined to comment on the litigation.

    The lawsuit against Harbour, which is based in Dallas, is the first of several that Cincinnati plans to file against out-of-state firms that acquired rundown homes in the wake of the housing crisis and then resold them at inflated prices without making repairs.

    “We are planning more litigation,” said Jessica Powell, chief counsel in the Cincinnati Law Department. Her department has set its sights on firms with “even more egregious business practices,” she added, without naming specific companies.

    In the wake of the 2008 housing crisis, opportunistic investors swooped in with hopes of profiting on tens of thousands of blighted homes across the country.

    Investment firms like Harbour scooped up the run-down, foreclosed homes at bargain prices, selling them to families who could not get conventional mortgages but were desperate to own homes.

    Harbour sold its homes through an arrangement similar to an installment payment plan, with a high-interest, long-term loan called a contract for deed, or land contract. But what begins as a dream of homeownership for many residents can end quickly when a payment is missed and the buyer is swiftly evicted.

    Cincinnati is seeking to prevent Harbour from selling additional homes to investors until the firm remedies all the outstanding building code violations at the properties it is selling.

    Harbour, city lawyers said, has been selling “substandard” homes to buyers in Cincinnati who often default on the contracts because they cannot pay for the repairs or keep up with the monthly payments.
    According to the lawsuit, Harbour’s contracts are “predatory and unconscionable” in part because the firm sells homes for up to five times the price it paid for them and holds the title to the residence until the final payment is made — which rarely happens.

    When the contracts for deed fall through, Harbour “churns the property through the process anew,” often to a new prospective homeowner.
    Harbour was not alone in buying cheap homes in need of major repairs and selling them through contracts for deed. Another national player, Vision Property Management, which is based in Columbia, S.C., and also operates in Cincinnati, has sold homes in rent-to-own deals that require tenants to make property repairs.
    Keeping tabs on the number of homes sold through contracts for deed or rent-to-own deals is difficult because the transactions are not always recorded.
For the story, see Cincinnati Sues Seller of Foreclosed Homes, Claiming Predatory Behavior.

For the lawsuit, see City of Cincinnati v. Harbor Portfolio Advisors LLC.

See, generally, The Housing Trap (In the wake of the housing crisis, low-income families have turned to seller financing to buy homes but these deals can be a money trap).

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