Shelter Growth Capital Partners has been buying homes that were foreclosed on during the financial crisis and later resold to buyers under long-term installment contracts, the New York Times reported today. The firm has bought just over 200 homes from Harbour Portfolio Advisors, a Dallas investment firm that has specialized in selling homes to lower-income buyers through what is known as a contract for deed. In these deals, a seller provides the buyer with a long-term, high-interest loan, with the promise of actually owning the home at the end of it. These contracts, a form of seller financing, have ballooned in recent years as low-income families unable to get traditional mortgages have turned to alternate ways to buy homes. The homes are often sold “as is,” in need of costly repairs and renovations, and many of the transactions end in eviction when buyers fall behind on payments. The market is growing in part because so many would-be home buyers with damaged credit histories cannot get loans. Banks are unwilling to write mortgages to riskier clients after being fined billions of dollars for pushing borrowers into unaffordable subprime mortgages before the crisis.
