Dallas Firm Preyed on Vulnerable Homebuyers by Selling Them Blighted Houses in Ohio, Suit Says

In recent years, a private investment firm in Dallas and others sold foreclosed homes on high-interest installment contracts to poor Cincinnati residents who could not get traditional bank mortgages.Now, the Ohio 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 Dallas 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 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 rundown, 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.Since the publication of the Times articles and other news reports, federal and state investigators have begun to scrutinize Harbour and other big players in the business. The Consumer Financial Protection Bureau began investigating Harbour last spring, and in February, a federal judge ordered Harbour to comply with a bureau subpoena seeking documents. And seven U.S. senators wrote to the consumer bureau last year to express their concern over firms like Harbour.  Continue reading...