On September 9, the Minnesota attorney general filed a complaint alleging that a company and its owners used predatory and deceptive contracts for deed to target members of a religious and ethnic community, constituting reverse redlining in violation of multiple state and federal laws. The complaint alleges the defendants marketed their seller-financed contracts for deed as interest-free alternatives to conventional mortgages, leveraging purchasers’ religious beliefs that prohibit paying interest to lure them into transactions with dramatically inflated home prices, undisclosed finance charges, and “exorbitant” annual balloon payments. The complaint alleges the defendants purchased homes at market prices and resold them — sometimes on the same day — at prices at times more than double what they paid, leaving purchasers “immediately underwater” with no equity. According to the complaint, the defendants’ contracts allegedly failed at a rate more than 20 times the national foreclosure rate, and upon cancellation, the defendants allegedly retained all payments and equity before reselling the properties on similar terms.

The attorney general alleges violations of TILA, including: (i) failures to disclose APRs and total finance charges; (ii) failures to conduct ability-to-repay analyses; (iii) failures to provide written appraisals for higher-priced mortgage loans; (iv) failures to provide required disclosure statements and pre-loan counseling certifications for high-cost mortgages; and (v) the inclusion of prohibited balloon payments in high-cost mortgage transactions. The complaint also alleges violations of the ECOA and the Minnesota Human Rights Act for intentional discrimination on the basis of religion and national origin, as well as violations of the federal CFPA’s prohibition on unfair, deceptive, and abusive practices, and state consumer fraud and deceptive trade practices laws and contract for deed disclosure requirements, including requirements under a 2024 Minnesota law expanding protections for contract for deed purchasers. The attorney general seeks a permanent injunction, civil penalties, restitution, disgorgement, and the rescission or reformation of existing contracts to remedy consumer injuries.