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HUD Program Detrimental to Homeownership

Updated: Mar 11

Lease agreement no ownership

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.

Step to enter into a lease agreement

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.