Land installment contracts have long served as an alternative path to homeownership by allowing buyers to make direct payments to the seller over time until the house is paid in full. Under a land contract, the seller retains the legal title to the property, while permitting the buyer to take possession of it for most purposes other than legal ownership. While fair land contracts have existed and do exist in Ohio, many more contracts exist that are predatory and exploit vulnerable families who are liable to lose the home they are attempting to buy.
On October 9, Greater Ohio Policy Center teamed with the Federal Reserve Bank of Cleveland to present policy makers in Columbus with a policy briefing, providing background on land installment contracts and how they are intended to operate; how common land installment contracts are in Ohio; and providing local perspectives on land installment contracts and the dangers of “predatory land installment contracts” throughout Ohio.
Lisa Nelson, the Community Development Research Manager with the Federal Reserve Bank of Cleveland shared findings from her recently completed research for her report The American Dream or Just an Illusion? Understanding Land Contracts in the Midwest Pre- and Post-Crisis. Lisa’s research examines contract for deed activity across six Midwestern states to help improve the understanding of this market and the places in which this activity occurs.
In the wake of the subprime mortgage crisis of 2007-2010, thousands of homes across Ohio ended up in foreclosure. As a result of the crisis, the Federal National Mortgage Association (Fannie Mae) found itself with a large inventory of homes and a need to dispose of them in an expedited manner. Fannie Mae used the bulk sale program to rid itself of this inventory, and allowed large investment firms to purchase foreclosed homes for pennies on the dollar. Some firms then turned around and began offering the homes for sale through land contracts with terms many buyers found hard to meet. Neighborhoods of color and immigrant neighborhoods were especially vulnerable.
Greater Ohio Policy Center supports enacting legislation that will bring about needed reform to the state’s existing land contract statute while still preserving the ability of buyers to purchase a home thought a land installment contract. Many Ohioans who would otherwise not be able to purchase a home through a traditional mortgage can still become homeowners through land contracts if changes are made to state law to rein-in some of the ‘problem actors’ who have taken advantage of gaps in state law.
Greater Ohio wishes to thank Lisa Nelson and the Federal Reserve Bank of Cleveland for partnering with us on this important briefing, as well as our other presenters who shared information and their experiences dealing with predatory land contracts and the effects they have had on communities across Ohio, including Jessica Powell with The Port of Cincinnati, Kalitha Williams with Policy Matters Ohio, Erica Faaborg of the Cincinnati Law Department, Steve Sharpe with the Legal Aid Society of Southwest Ohio, and Matt Martin, Executive Director of Trumbull Neighborhood Partnership.