Trio Residential, LLC (Trio), a company marketing itself as helpful to low-income families, with the dream of homeownership, who could not qualify for a traditional FHA loan, created multiple homeownership programs financed through Cedar Band Corporation Mortgage Agency (CBC), a Native American mortgage company. Trio’s programs caused many to file for bankruptcy, ruined credit with judgements, and debt.
In 2016, Trio offered a program to consumers in which their subsidiary companies IHFC Georga, California, Colorado, Atlanta, and Texas purchased properties in the south west using FHA loans from CBC Mortgage and AmWest Funding Corp., where the consumer entered into “Homeownership” with Trio as the finance company.
The “Finance Agreements” were lease option to buy, using a contract for deed, with the caveat that title was held by IHFC companies. Families were told by Trio that they can eventually assume title to the property. However, Trio’s contract is strict and inflexible towards consumers, making it difficult for many to achieve homeownership.
“Every time I want to purchase, [Trio] finds some reason for me not to qualify. This means I would have to do another extended lease, which means my rent would go up by another 5%. Trio also charges $195 to do that lease extension. It is just highway robbery, and I hate it. I hate that I ever got into [Trio’s program],” Felecia Turner, GA Trio program participant since 2018, said.
Contracts for Deeds are not federally regulated, and states have no standardized process. Each state is responsible for regulating the transaction involving a contract for deed.
Trio’s program starts with finding consumers who cannot purchase property with a loan but have sufficient funds for closing and income for mortgage payments.
Section of Trio website
“Step 1, Apply with Trio. The consumer goes to a mortgage lender to apply, for a the Trio program.”
“Step 2, Find their home with a real estate agent.”
“Step 3, Write a contract to buy a property assigned afterward.”
“Step 4, Go to a title company for their closing.”
“Step 5 After closing, move to the house the customers choose.”
“Step 6, Become a Home Owner."
According to Trio's website, the steps imply that the consumer is purchasing a property. When in realty, the consumer is not purchasing a home, they are entering a lease to own or a land contract (contract for deed). Trio controls the Native American non-profit companies as administrators whom purchase the property using FHA loans.
CBC Mortgage encountered problems when the Department of Housing and Urban Development (HUD), a government entity, questioned CBC mortgage who provided FHA loans to Trio. HUD argued that CBC misused FHA loans by providing them to corporations and not individuals for investment properties and ordered the National Consumer Law Center (NCLC) to conduct a program risk assessment. NCLC found significant issues jeopardizing the ability to successfully transfer ownership to the consumer. The program had less than 50% success rate.
In April 2019 CBC sued HUD for “discriminatory and unlawful “Mortgagee Letter” issued without warning by the U.S. Department of Housing and Urban Development (“HUD”) that has effectively destroyed Plaintiff CBC Mortgage Agency, an instrumentality of the federally recognized Cedar Band of Paiutes Indian American tribe, in one fell swoop,” according to Case 4:19-cv-00030-DN-PK.
“Many Americans find saving the funds necessary to make the minimum down payment to qualify for an FHA-insured loan difficult. They cannot obtain the necessary money from family members. Particularly true for minority borrowers, who often do not have the benefit of relying on intergenerational wealth and gifts from family members as a source of savings and, thus, down payment funds,” according to the case’s background.
Following the lawsuit, HUD published new clarification approving Native American nonprofit companies for property ownership using FHA loans. The change established new regulatory adjustments to approve Choctaw American Insurance as purchaser using FHA loan, with Trio as the program administrator.
Despite the risk posed to low-income and minority individuals, HUD partnered with Trio in 2021, to promote the “Risk Sharing Program,” a program providing loans at reduced interest rates to state and local housing finance agencies. HUD’s partnership with Trio as program manager, became nationwide. CBC continued to provide FHA loans to the Native American non-profit companies managed by Trio, to provide high risk programs to consumers.
Congress bi-partisanly approved HUD’s partnership, making Trio’s program legal and eligible to grant FHA-Insured loans, intended to make homeownership accessible, easy to understand, and straightforward for mid to low-income individuals. However, the program is a maze of various companies, subsidiaries, contracts, agreements, and legal terms, leading to consumer confusion.
Trio allows the consumer to choose their realtor, the property, and a contract is written on a property, with the consumer’s name as the purchaser. The consumer signs the contract, pays for a property inspection, and gives an earnest money deposit held in Escrow. Trio invoices the closing costs to their targeted program participant (the consumer) at closing, making it seem like they purchased the property.
The “OwnOption” program uses terms like “home,” “homeownership,” “your Lender,” “your Title Company,” “you choose your home,” “first-time home buyers,” and HUD is Trio’s partner, adding to the consumers’ trust in believing the low to middle-income consumer own and have rights to the desired property. According to Trio’s marketing, “Trio’s mission is to provide innovative homeownership solutions that promote self-worth in our customers and strengthen the communities we serve.”
Most Trio consumers believed they were the legal co-owners of the property with a HUD-approved entity. “My title company, Courtesy Title & Escrow, told me I was sharing the property’s title with another company. If I wanted to remove the co-owner, I would have to refinance and pay a 3 to 6% penalty fee,” program participant Jose Juan Guevara Posada, from Manassas, VA, said. He entered Trio’s program in November 2022, paying over $50,000 at closing while under the impression he was on the property’s title. Guevara remains in the program and is not on the property’s title, according to county court records.
“They told me I was on title with Choctaw,” Jose Posada, a Trio customer from 2022, said. Posada paid $50,000 for a low monthly payment with additional Trio fees. Customers are under the impression that they are on title or sharing title, yet they are not on title.
Under Virginia law, Va. Code 55.1-3000 et seq., passed in 2019, all executory contracts, including land installment contracts and lease-options contracts, are treated as rental agreements subject to the Virginia Residential Landlord and Tenant Act. The consumer does not own the property. After closing, the customer pays the mortgage payment, taxes, hazard insurance, secondary insurance, and any other fees Trio charges. The customer is also responsible for all property maintenance and upkeep.
In many states, the law requires little to no legal process or public auction of the home for the highest and best value. Transactions are typically invisible, putting contract buyers at significant risk of losing all their investment and equity in the home with an inability to transfer or convey good title, according to NCLC’s April 30, 2021 Summary of State Land Contract Statutes National Consumer Law Center Report.
“I was under the impression that everything I put down for closing was for a home purchase. I lost my job, trying to continue mortgage payments. I was not late, but Trio evicted me that Tuesday, the week COVID shut down the nation,” Jessica Johnson, GA Trio program participant from 2017 to 2019, said. Johnson paid over $25,000 at her closing and paid for two-years what she considered her mortgage until losing her job due to the Pandemic that overtook the nation.
Trio may deem the program consumer (Buyer) in default if they are determined “insolvent” by Trio’s standards through loss or change of job, bankruptcy filing, judgment, failure to maintain the property, nonpayment of utilities, rents the property without Trio approval, change in the circumstances, adverse credit action, or tax liens. The Buyer cannot sell the property without written consent and notice from Trio (the seller), withheld at Trio’s discretion. The contract is non-transferrable to any party, heirs, executors, or successors in the case of the Buyer’s death or incapacitation, without the Seller’s advance written notice which may be withheld for any reason,” according to the “Contract for Seller Finance” signed at the closing.
“I made the monthly payments consistently and on time. I left the apartment knowing they would charge a 3% penalty. It was so bad that I had two attorneys representing me. After terminating the agreements with Trio, they sent me $18,000 in collections five years after leaving the program. My attorney says to ignore the unlawful fees,” Sherrie Wright, program consumer, said.
“Anyone over 18 who will be living in your Trio-financed home has to apply to Trio. They will also need to sign your Trio financing agreement [one document signed during closing] and are individually responsible for the terms of your financing,” Trio’s General Facts page says. If the consumer does not comply with this term, they are in default.
Program consumers found themselves losing their homes and life savings and damaging their credit further. Trio serves as project administrator for non-profit organizations approved by HUD and remains as title holder for properties purchased using FHA loans.
True homeownership comes with the “Bundle of Rights.” The Bundle of Rights consists of “Possession,” “Control,” “Exclusion,” “Enjoyment,” and “Disposition,” according to the International Association of Assessing Officer’s 2019 report and Supreme Court case Lucas v. South Carolina Coastal Commission. The Trio and HUD process provides the illusion of homeownership without considering ownership rights and for many it has meant ruined credit and diminished chances of future homeownership.
By Alex Fernandez