Part 2: Local Catholics help end contract buying

To read the first part of this story, click here.

Fifty years after the Contract Buyers League was formed in Chicago, activists continue to fight against predatory lending, especially in poor neighborhoods and those that are predominantly home to people of color.

Jack Macnamara, who helped form the Contract Buyers League when he was doing community organizing work in Lawndale (see story in June 25 Chicago Catholic), has been working for legislation that would offer more protections for people who buy homes on contract. The bill that eventually passed last month could be stronger, but it’s better than nothing, he said.

The bill was passed by the Illinois House and Senate and sent to Gov. Bruce Rauner on June 29. He has 6o days to sign it.

State Sen. Jacqueline Collins, one of the bill’s sponsors, said the bill offers more protection for people who buy homes on contract. Such buyers generally receive fewer protections and pay more in interest than buyers who can get traditional mortgages. They must pay for expenses that traditionally are the responsibility of the owner, including taxes and expenses, but don’t build equity the way a buyer with a mortgage does.

Such provisions make it more likely that contract buyers will lose their homes with nothing to show for them than people with mortgages. If they finish the contract and take title to the home, they build less wealth from its appreciation because they paid higher costs to start with.

If the bill becomes law, she said, buyers would have a three-day cooling-off period after signing a contract to get out of it, and would have to be provided with information about contract buying from the attorney general’s office.

They also would have to be provided with an independent appraisal of the property — to try to stop speculators from paying a pittance and selling weeks later at a huge profit — and a list of building code violations that will have to be corrected. All contracts would have to be in writing, and would have to allow buyers a 90-day grace period before they could be evicted after a missed payment, similar to what is required after a foreclosure.
“We’re trying to give them some safeguards,” Collins said.

Macnamara said he’s concerned about a clause that says contract sellers can give a memorandum of the contract rather than the contract itself to the Recorder of Deeds, and he thinks that provisions that allow buyers to build some equity and limit responsibility for repairs could be strengthened.

In many cases, Collins said, families that buy homes on contract now do so for the same reason they did 50 years ago.

“There’s financial illiteracy,” Collins said, “and these people have poor credit for a variety of reasons. But home ownership has always been put out there as the American dream.”

Macnamara said the practice of selling homes on contract in some ways has gotten worse since the 2008 financial crisis. Now, he said, it’s not mom-and-pop real estate speculators. It’s corporations that are buying foreclosed properties for pennies on the dollar, often from the federal government, and selling them as-is on contract to buyers who then become responsible for making any needed repairs.

If the buyers can’t pay, or the companies stop making money from the property, they walk away, Macnamara said, leaving an abandoned building behind and further damaging the community.

Starting in 1967, Macnamara was able to work with contract buyers first in Lawndale and then throughout the South and West sides using the community organizing principals that were taught by Saul Alinsky and adopted by Msgr. Jack Egan, pastor of the now-closed Presentation Parish, 743 S. Springfield Ave., and director of the archdiocese’s Office of Urban Affairs.

The buyers banded together and tried to renegotiate their contracts with a variety of tactics, including public demonstrations at the homes of the contract sellers. Nothing worked until they instituted a payment strike, and even that had mixed results. Many of the West Side buyers did get their contracts renegotiated; many on the South Side were eventually evicted.

But even the South Side buyers came out ahead, Macnamara said, because they had been putting their monthly payments into escrow for the duration of the strike, and by the time they were forced out, they had enough saved for down payments on better housing.
Their fight was recounted twice in the Atlantic magazine, once in 1972 and more recently in Ta-Nehisi Coates’ 2014 article “The Case for Reparations.” Beryl Satter wrote about it in her 2009 book “Family Properties: Race, Real Estate and the Exploitation of Black America.”

Clyde Ross, co-chairman of the Contract Buyers League, still lives in his Lawndale home with one of his sons, and he says the league was a success.

“All these people, they renegotiated,” he said. “But it’s hard to pass on.”

Ross now is concerned about the young people on his block who seem aimless, and he wants to find a way to engage them in the community.

Macnamara said he’s not sure whether the effort was successful after all.

“I think we had successes,” he said. “But we barely scratched the surface.”

The Contract Buyers League filed two federal lawsuits trying to get the practice of contract selling property ruled illegal, with the support of a $250,000 appeal bond posted by the Jesuit province; both failed.

Collins and Macnamara are concerned about the resurgence of contract selling in a time when the federal government seems less interested in consumer protection.

In the late 1960s, the league got support from John McKnight, then the federal civil rights commissioner for the Midwest, and from local attorneys, including Thomas Sullivan, a future U.S. attorney. But to make it work, there had to be trust between the would-be organizers and the people they wanted to help.

Ross said that when the league was getting started, neighbors asked him what he thought of Macnamara, whether he was really trying to help or if he was also playing a game to take advantage of people. Ross drew on his experience growing up in Mississippi, where he learned to read the emotions white people might try to hide.

“When they get mad, the blood comes up in their face,” he said. “They can’t hide it. They might not even know they’re doing it. But do something a white person doesn’t like, and they’ll turn red.”

So Ross started to spend time with Macnamara, subtly trying to provoke him into betraying negative feelings.

“I never could make him turn red,” he said. “So I told everybody, he’s all right.”

Not everything was easy after that. Not all the young volunteers passed Ross’ test, and not all the young men in the neighborhood welcomed the organizers, especially as the months wore on and the West Side erupted after the assassination of Rev. Martin Luther King
“There’s no trust between white and black in this country,” Ross said. “Not then and not now.”