A lawsuit filed in federal court this week accuses a Texas firm of preying on prospective homebuyers in the city of Atlanta.
In the complaint, plaintiffs claim they were tricked by Harbour Portfolio Advisors, LLC and affiliates into thinking they were on their way to becoming homeowners after they signed agreements that essentially made them renters, The Atlanta Journal-Constitution reported.
Harbour targeted predominately Black areas with deals known as “contracts for deed” or “land contracts,” which gave plaintiffs “all the obligations of homeownership with none of the rights,” the filing alleged.
Kristen Tullos, an attorney with Atlanta Legal Aid, which is representing the plaintiffs, told the AJC that the Dallas-based firm owns scores of homes in the Atlanta-area — almost all of which are located in African-American neighborhoods. Several years ago, the real estate consulting firm bought thousands of foreclosed homes in various cities across the U.S.
Plaintiffs in the case include people who still live in homes purchased by the firm and some who’ve either moved or been pushed out.
“This is the most recent development in predatory lending,” Tullos said. “They are targeting neighborhoods that have been hit time and time again.”
Harbour purchased 85 properties in Fulton County between 2011 and 2015, the suit states. Though it is unclear how many of those properties were actually sold, 34 buyers have since been evicted.
In the wake of the housing market crash, the company used a sort of hybrid investment model where buyers swooped in to purchase foreclosed homes at dirt-cheap prices and either rented out the properties or held them for a while before reselling them after the market rebounded, the newspaper reported.
As long as residents continued making their monthly payments, the company received a steady cash flow, including an interest rate that was much higher than the mortgage rate, at the time, according to the AJC. Meanwhile, the purchasers were left to pay interest, taxes and insurance on the home and were responsible for any maintenance.
Purchasers would only own the home if they continued to make payments until the end of their contract. If they didn’t, however, they risked being evicted and losing everything they put into it, despite having made regular payments on the property. The purchasers could then be replaced with another buyer.
Citing a University of Texas study, the lawsuit states that over the course of two decades, more than 40 percent of contract-for-deed purchasers defaulted. What’s worse, less than 20 percent of purchasers received a deed for their properties.
The Atlanta lawsuit comes just months after the city of Cincinnati sued Harbour Portfolio over $360,000 in unpaid fines, fees and violation notices, The New York Times reported. The city also accused the firm of failing to properly maintain dozens of homes.
At the time, the firm also was under investigation by the Consumer Financial Protection Bureau.
In the past, Harbour and other firms who use “contract for deeds” have argued that the process is a path to homeownership. Tullos disagrees.
“The companies make it difficult for aspiring homeowners to ever achieve the goal of ownership, which is what they think they are doing,” she told the AJC. “None of the people in this lawsuit understood. They believed they were becoming homeowners and they later found out they were functionally renters.
“That was devastating.”