The Consumer Financial Protection Bureau (CFPB) has released an advisory opinion and research report highlighting predatory lending concerns related to contract-for-deed home selling.
In a press statement, the CFPB warned that contract-to-deed transactions “often have little oversight, and investment groups and other sellers can set a series of traps that leave buyers in unlivable homes, on the hook for tax liens and expensive repairs, and at risk of losing their down payments and homes.”
The agency’s new report details cases where predatory lenders used contracts for deed to target low-income borrowers, particularly in communities where the dominant religion prohibits paying or profiting from interest. The CFPB stated the predatory lenders created financially untenable situations that resulted in borrowers being forced out of their homes.
The CFPB added that while many sellers abused this financing structure to trick buyers and churn homes, contract-in-deed transactions are covered by the federal Truth in Lending Act. The CFPB’s advisory opinion and report are part of the agency’s efforts to address predatory and exclusionary home lending practices.
“The CFPB has found that investors are targeting people of faith with predatory mortgage products that set the borrower up to fail,” said CFPB Director Rohit Chopra. “The government is taking action to ensure that these products do not turn the dream of homeownership into a nightmare.”
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