Harbour Portfolio had purchased hundreds of homes in Atlanta (and thousands nationwide) from Fannie Mae and Freddie Mac which had been foreclosed upon during the mortgage crisis. The homes were purchased, sometimes for as low as $10,000, and then sold using “contracts for deed” to low income minority Atlanta residents for $40,000 or $50,000. Under the terms of sale, the buyers were required to pay interest of about 10% for 30 years before the house was actually theirs. The buyers were also responsible for repairing the properties, which were usually in terrible shape, having often been stripped of pipes and wiring. They also had to pay taxes and insurance. Should they miss a payment, they could be evicted like a tenant and would lose any value they had put in the house. They would also get no benefit from its increased value. After they entered into the contract for deed agreement, Harbour congratulated them on “buying “a house even though the house was not actually being sold to them.
We mapped Harbour’s transactions and found that the company had marketed almost exclusively in minority neighborhoods. We determined that between 2011 and 2015 in Fulton and DeKalb County, Harbour sales were concentrated in tracts with a racial makeup of 86.25% African American. We also discovered that contracts for deeds had historically been used in other parts of the country to avoid giving true home ownership to African-American residents.
We then filed a 12 count, 136 page complaint against Harbour on behalf of seventeen individual African-American consumers who alleged that they were discriminatorily targeted for abusive credit terms in these home purchase transactions. We alleged that, regardless of intent, Harbour’s practices had a disparate racial impact.
After Harbour’s motion to dismiss was largely denied, we settled our case against Harbour and the third party purchasers of their contracts. Under the settlement our clients got actual damages, restructured (real) mortgages and saved their equity.