Khraish Khraish, third from right, announced his offer to sell several of his rental homes to tenants in West Dallas in May 2017.
There’s a lawsuit brewing in West Dallas, where dozens of former renters purchased homes last year.
These low-cost rental properties owned by HMK Ltd. had racked up numerous code violations and were slated for closure after the city of Dallas tightened housing standards.
HMK sold many of those homes to tenants. Now, a lawsuit filed in federal court by two of the homeowners alleges the mortgage contracts are predatory.
Many of the people who’d rented homes from HMK Ltd., mostly in West Dallas, were paying as little as $300 to $500 a month. When new housing standards took effect in 2016, it looked like the rental business would close, and about half the tenants moved. The other half couldn’t figure out where to go, and stayed put until the last minute.
When HMK co-owner Khraish Khraish offered to make more than 100 remaining tenants homeowners this time last year, many jumped at the chance.
"I’m just here to make families happy in a home in West Dallas," he said.
And, Khraish says, he thought they all were. To his knowledge, nobody has fallen behind on their mortgage payments; no one has been foreclosed on. He says he hadn’t heard an unhappy word, until a lawsuit was filed against him last week in federal court by two of the new homeowners, Roberto Barahona and Julian Campos.
One of their attorneys is Stephanie Champion with Legal Aid of NorthWest Texas.
"[Campos] received absolutely no explanation of the terms that were unfavorable to him — terms such as the ‘snatch-back clause,’ which allows the lender to call 100 percent of the loan at any time and for any reason," she said.
Champion says neither of men speaks or reads English. The language in the contracts they signed does enable the lender to call for the remaining amount due on the principal, no matter the status of the loan. Khraish says as far as he knows, that’s boilerplate for the type of contracts he purchased. He hired the Arlington-based loan document preparation provider Pierson Patterson to draw them up.
"Though there may be language in here, I haven’t exercised that option and I have no intention of exercising that option,” Khraish said.
The Legal Aid attorneys say that doesn’t make them feel better. If the mortgage is ever sold to another lender, that language will still be in the contract.
According to the Dallas Chapter of the National Association of Minority Mortgage Bankers, these clauses aren’t used in qualified mortgages by big banks like Chase or Wells Fargo. They can show in seller-financed deals, like the HMK mortgages.
"Even if our clients had paid off 90 percent of the loan and spent time and money into making necessary repairs on their homes, they still have no security in their home," Champion said.
Attorneys say neither of their clients were given a thorough review of the contract before they were induced to sign. They claim many provisions weren’t translated at all. Khraish Khraish takes issue with that.
"Any notion that Mr. Campos and Mr. Barahona weren’t made aware of what the document suggested is false,” Khraish said. “Everything was absolutely translated to them and again, the process took four meetings over a two-week period."
The lawsuit zeroes in on other parts of the contract, too. While the interest rate is listed at 4.75 percent, it can jump as high as 18 percent if the borrower defaults. Legal Aid says what constitutes a default, isn’t defined in the contract — and wasn’t explained to either client. A right to inspection was also waived.
"The other option was eviction, the other option was homelessness," Champion said. "So yes, our clients under the threat of eviction, were induced to sign these predatory contracts because they had no other option."
Khraish agrees that his tenants-turned-homeowners had no other option, but disagrees that these deals are predatory.
"I stand behind everything we’ve done and I’m very proud of what we’ve done,” he said. “And we’re going to continue doing much more of it."
Champion doesn’t want to rip her clients out of their homes. She thinks there’s a way to make this work for everyone.
"I think that there’s a good deal to be had here,” she said. “All we need to do is amend these contracts in order to make sure that our clients have true ownership of their homes."
Which, for many of these West Dallas families, is all they’ve really ever wanted.
KERA reported on this housing crisis in West Dallas last spring and summer in our series, "No Place To Go."