Feds investigated 'predatory' company being sued by Cincinnati

Feds investigated 'predatory' company being sued by Cincinnati
Posted at 2:47 PM, Apr 21, 2017
and last updated 2017-04-21 15:07:37-04

CINCINNATI -- A property investor being sued by the City of Cincinnati has also drawn scrutiny from federal regulators.

City officials have accused the Dallas, Texas-based Harbour Portfolio Advisors LLC and associated companies of making "predatory and unconscionable land sale contracts" and not paying more than $300,000 due for various fees and fines related to properties it owns or has owned.

MORE: Cincinnati sues company over 'predatory' land sale contracts

The Consumer Financial Protection Bureau also filed a lawsuit against Harbour last November after the company failed to answer questions and provide documents requested in a civil investigative demand.

Bureau investigators wanted the information so they could check if Harbour's rent-to-own land deals violated the Consumer Financial Protection Act of 2010, the Truth in Lending Act, the Equal Credit Opportunity Act or any other federal consumer financial law, according to court records.

Harbour purchased thousands of foreclosed properties in bulk from Fannie Mae after the 2008 housing crisis. The company would sell them for several times what it had paid in "as is" condition, apparently without having made any repairs and without notifying buyers about any issues with the properties, according to the Cincinnati lawsuit.

In response to the bureau's lawsuit, Harbour described its contracts as a way for would-be homeowners with poor credit to buy property through monthly payments that are comparable to the cost of rent in the area. The company's average sales prices are $36,000 and the average monthly payment is less than $320, according to court records filed by Harbour.

However, the city's lawsuit accuses Harbour of selling blighted properties. The costs of fixing up the houses on top of the monthly payments to Harbour and other costs of owning a home were usually too much for the buyers to pay. If the buyer is unable to make his or her payments, Harbour terminates the contract and keeps the money already paid. Then the company sells the property to another unsuspecting consumer or an out-of-state investor, according to the city's lawsuit.

Harbour has sold at least 50 properties in Hamilton County and owns at least 35 more here, according to auditor records. Securities and Exchange Commission records show three of the Harbour funds managed by Charles Vose III have raised nearly $80 million from investors. Harbour's Linkedin page states the company has purchased more than 5,000 homes and holds mortgages exceeding $100 million in loan balance.

Calls to Harbour seeking comment weren't immediately returned.

Harbour went on to appeal a ruling that it had to comply with the Consumer Financial Protection Bureau's requests. The appeal was dismissed earlier this month under a rule to produce business records.

The company has not yet filed a response to Cincinnati's lawsuit.