Housing Regulator Is Pushed to Crack Down on Sales of Foreclosed Properties
by: Alexandra Stevenson and Matthew Goldstein
Lawmakers are pressing the nation’s housing regulator over the sale of thousands of foreclosed houses to investment firms that have pitched the promise of homeownership to people unable to get a traditional mortgage.
Some local authorities and regulators are taking legal action against several of these firms, accusing them of engaging in predatory business practices by reselling these often rundown houses “as is” through rent-to-own and other seller-financed transactions, sometimes known as contracts for deed.
Since the 2008 housing crisis, seller financing has become a lucrative business model as banks have largely stopped lending to lower-income families and the government has tried to sell a huge inventory of foreclosed homes.
Two of the nation’s largest firms in this business — Vision Property Management and Harbour Portfolio Advisors — have come under federal and regulatory scrutiny after a series of articles on them in The New York Times.
On Thursday, Representative Elijah E. Cummings, Democrat of Maryland, who sits on the House Committee on Oversight and Government, wrote to the director of the Federal Housing Finance Agency, urging the regulator to stop Fannie Mae and Freddie Mac, the big government-controlled mortgage finance companies, from selling foreclosed homes to these firms.
Other lawmakers have raised concerns, too. During a Senate hearing on the future of Fannie and Freddie on Thursday, the F.H.F.A. director, Melvin Watt, was questioned about the sale of foreclosed houses to firms using contract for deed.
Senator Sherrod Brown, Democrat of Ohio, told Mr. Watt that the agency should prohibit Fannie and Freddie from selling nonperforming mortgages and houses to firms looking to resell them through contract for deed. Mr. Watt promised that the housing agency would act to limit those sales.
“It would have to be on a going-forward basis, but we are actively looking at that issue now,” Mr. Watt told the Senate Banking Committee.
After the housing market collapsed nearly a decade ago, Fannie resold about 400,000 homes to investors, including more than 10,000 to firms that specialize in seller-financed deals. Some of those homes were sold in bulk transactions at rock-bottom prices. Fannie stopped such bulk sales in 2014. But firms continue to buy individual homes from Fannie on the open market.
In all, Fannie has resold 1.2 million homes since 2009, the worst year of the crisis.
For several months, Mr. Cummings, the ranking member on the oversight committee, has been focused on Vision Property Management, a rent-to-own company based in Columbia, S.C., which owns dozens of houses in Baltimore and more than 6,000 nationwide.
The Maryland congressman has been demanding documents from Vision since January, saying that he is concerned that it is duping poor consumers into rent-to-own contracts that become money traps. His office has spoken to Vision at least twice, according to correspondence the office made public, but those conversations have yielded little.
On Thursday, Mr. Cummings wrote to Vision and its chief executive, citing “grave concerns about the physical and financial well-being of tenants” with leases from Vision.
Mr. Cummings said Vision’s “limited document production to date has heightened concerns about the potential harm Vision may be inflicting on families in Maryland and throughout the United States.”
Valerie L. Hletko, a lawyer for Vision, said “the letter’s escalated rhetoric does nothing to assist Americans without access to traditional mortgage loans to achieve homeownership, which Vision works to do every day.”