By Nick Braune
Mid-Valley Town Crier
This week I interviewed Corinna Spencer-Scheurich, an attorney with the South Texas Civil Rights Project. STCRP has offices on Cesar Chavez Road in San Juan, behind the historic farm worker (UFW) hall, and is always doing something to help the poor and stop injustice here in the Rio Grande Valley.
Braune: Counselor, I understand that you have been to court this week on an important issue. Some of your clients who have purchased property in the colonias have later found out that there was some nasty catch in the contract process. (Frankly, my wife and I bought a house a few years ago and it was a complicated and tiring process, and I can see how someone could sign something they shouldn’t sign, if that is the problem.) Anyhow, do tell us a bit about what is happening to these families in the colonias.
Spencer-Scheurich: When the families go in to sign the closing documents, they get all the normal paperwork that gives them title in their name and gives the seller the right to foreclose if the families don’t pay. Here’s the problem: Included in the paperwork, is a Warranty Deed transferring title back from the buyer to the seller.
So the same day the families get title to the property and become owners, they sign title back to the sellers unconditionally. The families walk away thinking that they are buying the property, when really they own nothing. The sellers keep this second title document from the families in their files and use it whenever they want to kick the buyers off the property as easily as evicting a renter. The sellers are getting away with avoiding the foreclosure laws designed to give a level of protection to the buyers.
Braune: It seems to me like a clear injustice.
Spencer-Scheurich: Yes. Families sign the documents because the seller exploits an imbalance in education and knowledge. First, many of the buyers don’t speak or read English. They are depending on the seller to translate. Also, many of these families are first generation Mexican-American, with little familiarity with how the American property laws work. And the paperwork is difficult; even I had a hard time navigating and understanding all of the documents that went along with the purchase of my house.
Finally, if families ask about the Warranty Deed that they are signing, they are reassured that the document won’t be filed unless they are behind on their payments. The problem is that title is effective the moment it is signed and delivered. A signed title can sit in a drawer for decades and then be used to prove ownership as if it were signed the day before. The situation is a ticking time bomb that could deprive people of land that they have paid on for years and leave them with little recourse.
It is unjust to exploit those who are working for a better life and looking for the American Dream in purchasing their own property by setting them up to fail while taking all of their money.
Braune: How many do you estimate at this point may be affected?
Spencer-Scheurich: From our searches of public property records, we believe that all of the San Cristobal and 493 Estates colonias in rural Edinburg are affected. In San Cristobal, as many as 180 lots are affected, and in 493 Estates it is at least a couple dozen. We also believe that the developer, William Schwarz, has developed other colonias and is using the same documents.
Braune: Here’s a dumb question. When a house is bought from the developers with this contorted contract arrangement, there is no bank involved. Is that right? When we bought our house, the bank seemed to want to know every detail.
Spencer-Scheurich: That is right — no bank is involved. It is common in the colonias for property purchases to not have a title company or bank involved. The properties are owner-financed for extraordinarily high interest rates, in this case 16%. To be fair, many of the people buying would have a hard time getting traditional bank loans, but no one is such a bad credit risk that they deserve that type of financing. It makes it almost impossible for people to get ahead.
Braune: What are you trying to accomplish in the long run?
Spencer-Scheurich: In the long run, I am trying to prevent this from happening to other families. I also am blowing the whistle on this practice so that we can resolve the title problem long before this ticking time bomb blows up on the families who will struggle to pay their mortgage on time for years, just to find out that they gave away title at the very beginning. I also think that it’s time we get the legislature to pass a law that protects people from these inherently fraudulent transactions. We have seen this work for Contracts for Deed, predatory loans that have been highly regulated to protect consumers.
Braune: Thanks for this interview and the important work you are doing.