New York Times Sees Malfeasance in Contracts for Deed

The editorial Board of The New York Times raises alarms about the growing prominence of contracts for deed—a Depression-era financial arrangement with roots in racist housing policy.

The editorial follows a recent report in The Times by Alexandra Stevenson and Matthew Goldstein, finding contracts for deed "increasingly being used by investment firms that have bought thousands of foreclosed homes and want to sell them to lower-income buyers 'as is,'" according to the editorial.

Contracts for deed make gouging possible, because unlike traditional mortgages, there is no appraisal or inspection to ensure that the loan amount is reasonable. They also let an investor swiftly evict buyers for missed payments, rather than giving them time to catch up, as required under a mortgage. And they usually require the buyer to pay hefty upfront fees. Unlike a rental security deposit, however, the fee is almost never refundable.

The editorial compares contracts for deed to the subprime loans of the housing bubble leading up to the Great Recession. After making it clear that contracts for deed only help investors, while "nearly always" inflicting harm for borrowers, the editorial calls for the Consumer Financial Protection Bureau to "assert its authority over these contracts…"