Late last year, ProPublica in collaboration with the Sahan Journal published an investigative report about the serious risks posed to Minnesota Somali families by the sale of contracts for deed. Many prospective Somali home buyers looking for increased space, better schools and neighborhoods, and a way avoid paying or profiting from interest (a principle important to members of the East African Muslim community), have taken the non-conventional, contract for deed route. But the potential pitfalls are not always clear, and buyers are often mistaken about the lack of protections and unforeseen consequences they might face.

Now, as a result of the ProPublica-Sahan Journal report, some federal lawmakers, including Senator Tina Smith of Minnesota, are calling for further consumer protections. A recent senate subcommittee hearing led to discussion about how to better shield unwary consumers and whether federal or state laws ought to apply to these deals.

Witnesses testified that low-income buyers, frequently from communities of color who cannot secure traditional mortgages or choose not to use them because of religious beliefs, instead have opted to use contracts for deed. Among those witnesses was Beth Goodell, supervising attorney at Mid-Minnesota Legal Aid (MMLA). Goodell told senators that because state law offers so few protections, buyers are at risk of losing everything.

“My clients tend to have trusted the sellers,” Goodell said. “One of my clients said to me, ‘Why would this seller sell me a house that he knew I couldn’t afford?’ And the answer, ‘The seller would make a lot of money if you fail,’ was beyond her understanding.” Read the full story.