Jan 9, 2017
Millions of people have been caught up since the recession in an old scheme for selling homes to poorer people, particularly in the Midwest and the Southeast. Almost half may lose their home.
After the housing bubble collapsed a decade ago, mortgage banks cut back on lending to people with low income and bad credit. Poorer people trying to borrow money to buy a home were out of luck.
That's when Wall Street investors began buying thousands of foreclosed, trashed houses and offering them for sale using the “land-contract” scheme from the 1930s. The “investor” lets the client live in the house as long as the client makes monthly payments, makes repairs, and pays property taxes and insurance. But the client doesn't own the home until having paid each and every payment for 20 years or more. If the client misses one payment, the investor can throw them out without going through any long, expensive foreclosure or eviction process.
The investor makes the most profit by contracting the same house to one client after another, which gives them an incentive to make this happen.
Developed 80 years ago, this same kind of exploitative scheme goes on – because capitalism goes on.