Risky home-ownership schemes disproportionately pursued by rural folks and people of color

Jennifer Ludden reported this week for National Public Radio under the headline, "Millions of Americans are resorting to risky ways to buy an affordable home."  An excerpt highlighting the rural angle follows: 

People of color and those in rural areas are more likely to use these risky arrangements

A first of its kind national survey by The Pew Charitable Trusts finds 36 million Americans — about 20% of all borrowers — have used alternative ways to finance a home at some point, including 7 million currently in such arrangements. The borrowers are largely low-income, more likely to live in rural areas, and disproportionately Hispanic and Black, reflecting the racial gap in homeownership.

Unlike mortgages, alternative financing deals are usually not recorded with any government office. They don't start with a bank or mortgage company, and so are not subject to the same state or federal regulations.

"In most of our cases, we have handwritten notes that wouldn't pass muster," says Peggy Lee, an attorney with Southeastern Ohio Legal Services. She says some of her clients have even been duped into thinking a verbal contract was binding, though they're not recognized in Ohio.

This leaves borrowers with higher costs and fewer protections. They can be suddenly evicted without a right to a normal foreclosure process. They're shut out of tax and other homeowner benefits. The legal ambiguity prevented many from being eligible for COVID-19 financial relief or the moratorium on evictions, creating a double whammy for families most likely to suffer during the pandemic.