Predatory land contracts take advantage of low-income homebuyers, NY Times says
Following the mortgage meltdown that began nearly a decade ago, it became harder for many buyers to get a loan to purchase a home.
That has provided an opportunity for a number of private investors, however, who purchase needs-work homes for cash and then resell them to individuals outside the traditional housing marking on land-contract terms, the DealBook page of the New York Times (reg. req.) reported last month.
The problem is that such contracts for deed, which don’t provide for title to pass to the buyer until the last payment is made, don’t include a number of legal protections for buyers that are available for those who have mortgages. And, as with the subprime mortgages that led to the mortgage meltdown, land contracts and their resulting problems disproportionately affect minorities, says an opinion piece by the New York Times (reg. req.) editorial board.
Meanwhile, adding to the problem, buyers who purchase in this manner may not realize what is involving in repairing and maintaining the homes until it’s too late, the Times says. Traditional mortgage lenders require the property to qualify for a loan, which operates to protect buyers from getting a home with major defects, the newspaper notes.
The editorial calls for the Consumer Financial Protection Bureau to step up and more closely regulate land contracts, which are not even recorded in some states.
The CFPB is supposed to protect consumers against loans that are unfair, deceptive or predatory, the newspaper says, and contracts for deed fall into all three of these categories.
See also:
Washington Post (reg. req.): “The Divided American Dream”
