Predatory lending suit alleges Vision Property targeted Black buyers

Register now

A group of civil rights organizations in Michigan launched a class-action lawsuit against Vision Property Management, a real estate investment administration firm with a history of predatory lending.

The group — comprised of the National Consumer Law Center, ACLU of Michigan, NAACP Legal Defense and Education Fund, and Michigan Poverty Law Program — alleged that the company had committed violations of the Fair Housing Act, Equal Credit Opportunity Act, Truth In Lending Act, Elliott-Larsen Civil Rights Act, Michigan Consumer Protection Act, Real Estate Settlement Procedures Act. The group also accused the firm of negligence, breach of contract, and breach of the duty of good faith and fair dealing.

The lawsuit alleges that, following the housing collapse, VPM bought around 1,000 foreclosed, uninhabitable properties in majority Black neighborhoods through REO bulk sales. They claim VPM later sold them at around 500% markups without fixes or renovation. One example outlined in the legal documents describes a dilapidated Wayne County, Mich., property purchased by VPM for $7,300 and sold to one of the plaintiffs for $40,000.

About 70% of the homes are in the Detroit metro area, with most of the others located in Flint, Inkster and Pontiac, Mich. From 2011 to 2015, Detroit's population skewed 81.5% Black while the other three cities had an average of 60.7% Black inhabitants, according to the Census Bureau's American Community five year estimate surveys.

The lawsuit alleges racial targeting since Vision sold these houses in predominantly Black communities by marketing primarily through lawn signs.

"They did have some online advertising, but the majority of the way they reached people was through yard signs," Sarah Mancini, staff attorney with the National Consumer Law Center, said in an interview. "So the people who saw them were the people who lived in these communities. That aspect of their business model has been described in other lawsuits against them as well."

The borrowers would enter seven-year contracts, under what they were told were leases with options to buy, the suit states. However, only minor portions of their monthly dues would apply toward the purchase price, with the rest kept by VPM as conditional transaction charges. Instead of owning the properties outright once the seven years passed, the borrowers would be locked into long-term mortgages with very little of the home sales price paid down.

"The sales pitch and representations led people to believe that at the end of seven years, it'd be paid off," Mancini said. "But at the seven-year mark, the contract was structured to automatically convert to a land contract and they would still owe a significant balance close to where they started."

Under Michigan law, homebuyers with land contracts are privy to statutory protections regarding foreclosures. VPM was able to eschew these coverages by labeling each mortgage as a "residential lease with option to purchase agreement" with a “triple-net, bondable lease" subheading, according to the lawsuit claims. The designation also allowed the firm to avoid the obligation to verify the borrower’s ability to pay.

By putting the contracts under different names, "they were posing to evade those laws. We alleged that those were unfair and deceptive practices. We're also alleging they violated the Truth In Lending Act by not making any of the usual consumer lending disclosures about the cost of credit. They never told people the interest rate they were charging or the schedule of payments they would make," Mancini said.

Other similar lawsuits have been launched against the Columbia, S.C.-based company, which operates rent-to-own properties around the country. In 2017, Vision tried evicting a tenant from a Milwaukee property who was under a rent-to-own contract with them. Its local affiliate later admitted it could not evict the tenant. Fannie Mae agreed to stop selling foreclosed homes to the company that same year, after Maryland Democratic Rep. Elijah Cummings sent a letter to the Federal Housing Finance Agency regarding the company’s dealings with properties in Baltimore.

In 2019, New York State regulators brought a suit against Vision for unlicensed and predatory mortgage lending. Vision settled that suit in January 2020 for $3.75 million and forgiven loan balances.

Predatory loans targeting the low-income Black communities aren't new either. Historically, conventional lenders and banks considered this group high risk and largely denied them credit. Black homebuyers became targets for subprime mortgages because they were credit starved, said Lorray Brown, managing attorney and consumer law attorney at the Michigan Poverty Law Program.

"More companies would go into Black communities to offer credit at very high interest rates and predatory terms," Brown said in an interview. "At the downside of the subprime lending and foreclosure crisis, the Black community was fertile ground for new and other predatory schemes coming in and offering the dream and vision of homeownership and wealth accumulation. [VPM] was able to buy up all of the homes that had been foreclosed in these Black communities at auction, then turn around without even fixing them up and sell them for about $40,000."

Vision Property Management did not return a request for comment.

For reprint and licensing requests for this article, click here.
Lawsuits Racial Bias Wealth Inequality Fair Housing Act Distressed Foreclosures REO Michigan
MORE FROM NATIONAL MORTGAGE NEWS