Community development and homeownership: Experiences of citizens who purchased homes through 'Contract for Deed,' a category of subprime lending

Homeownership is a fundamental element of the American Dream, particularly for minorities, low-income, elderly households and immigrants because it offers values that renting does not have. Homeownership has not always been available for these vulnerable groups because of a lack of credit, down payment, verifiable income, and legal status.;Homeownership is dependent on obtaining a mortgage (loan) from a financial institution such as a bank, or a mortgage company and borrowers are placed in either a prime or subprime category. Contract for Deed is an extreme example of a subprime mortgage. Contract for Deed is a type of contract often used in transactions between private parties and the seller generally retains legal title to the land until paid in full.;The purpose of this study is 3 fold: (1) to provide an analysis of experiences and demographics of Contract for Deed homebuyers (2) provide empirical information on Contract for Deed as an example of subprime lending in Harris and Fort Bend Counties and (3) to determine if the requirements in the 1995 and 2001 State of Texas Contract for Deed laws are being implemented.;The research methodology was based on triangulation to identify the target population and their characteristics. Data collection was done through: (1) search of county records to identify investors' records of contract for deed purchasers (2) pilot study of buyers using Contract for Deed (3) Focus group with experts, interview with lawyers and homeowner and (3) Mail and one-to-one survey using structured questionnaire (snowball sampling). The analysis was done through: (1) GIS to conduct spatial analysis and (2) Descriptive statistics of socio demographic characteristics of buyers and their housing purchase using SPSS. A total of 59 surveys were collected over 36 months (3 years and 3 months).;Data Collection was limited because: (1) the pilot study surveyed only those who complained about Contract for Deed (2) There were few Black respondents because they were reluctant to divulge information and to be interviewed (3) the largest groups in the targeted population were Hispanic and they may have been over represented.;Findings indicate that buyers in a Contract for Deed transaction do not have the tax benefit of homeownership or their equity. County records indicate that most sellers do not file their Contract for Deed documents with the county clerk as required by law. Sellers often do not subdivide or plat Contract for Deed properties, leaving tracts of land to remain as one parcel. The City, County and State lose revenue when the taxes are not paid on these residences which do not exist in their records. Finally, recently enacted federal legislation will require greater scrutiny of all types of home loans, both prime and subprime. Due to job loss and pending foreclosure, this new group of sellers may opt to use contract for deed to sell their home quickly.