## Facts

- African-American plaintiffs entered “contract for deed” (installment land contract) home-purchase transactions for foreclosed residential properties.
- Harbour Portfolio VI, LP and Harbour Portfolio VII, LP bought foreclosed, Fannie Mae–owned “real estate owned” homes and resold them using standardized contracts for deed.
- Plaintiffs alleged the homes were often in poor condition and were sold without pre-sale repairs.
- Plaintiffs alleged Harbour marked up prices significantly and offered 30-year terms with interest rates around 9.9%–10%.
- The contracts allegedly shifted to buyers responsibility for repairs, taxes, and insurance and contained forfeiture provisions allowing cancellation, eviction, and retention of prior payments upon default.
- Plaintiffs alleged these practices targeted minority neighborhoods and African-American consumers through marketing and geographic concentration of transactions, producing a foreseeable racial disparity.
- Plaintiffs asserted federal and state claims, including FHA and ECOA discrimination theories (intentional targeting and disparate impact) and consumer-credit disclosure claims under TILA.
- Defendants moved to dismiss under Rule 12(b)(6), arguing inadequate pleading, lack of statutory coverage, and statutes of limitation.

## Issues

1. Whether the complaint plausibly alleged “reverse redlining” under the Fair Housing Act and Equal Credit Opportunity Act by pleading predatory credit terms plus either intentional racial targeting or disparate racial impact.
2. Whether plaintiffs plausibly pleaded disparate treatment and disparate impact theories based on Harbour’s alleged policies and neighborhood racial-composition allegations.
3. Whether statutes of limitation barred FHA and ECOA claims, or whether a continuing-violations theory could apply to an alleged ongoing pattern of discriminatory credit practices.
4. Whether the alleged contracts for deed could constitute “credit” transactions (and, as pleaded, function like mortgage lending) such that federal consumer-credit statutes could apply.

## Decision

- The court denied dismissal in substantial part as to the core FHA and ECOA reverse-redlining/discrimination claims.
- The court held plaintiffs plausibly alleged predatory terms (high interest, significant markups, repair/tax/insurance shifting, and harsh forfeiture remedies) and sufficient facts supporting racial targeting and/or disparate impact.
- The court allowed the FHA and ECOA claims to proceed, finding the continuing-violations theory adequately alleged for limitations purposes at the pleading stage.
- The court granted dismissal in part as to certain other claims, including some TILA-based claims found time-barred, and dismissed additional ancillary claims on limitations or pleading grounds.

## Legal Principles

- A reverse-redlining claim may be pleaded by alleging (1) predatory or unfair lending/credit terms and (2) either intentional targeting based on race or a policy causing a disparate racial impact.
- For disparate impact at the pleading stage, plaintiffs must allege a specific policy or practice and a plausible causal link to a racial disparity; detailed proof is typically tested later in the case.
- Statute-of-limitations defenses may be overcome at the pleading stage where the complaint alleges a continuing pattern of related discriminatory acts and at least one act within the limitations period.
- The statutory label of a transaction does not control where the pleaded substance describes an extension of credit connected to the sale of a dwelling; contracts for deed may be treated as credit arrangements for certain federal claims, depending on the allegations.

## Conclusion

The court permitted plaintiffs’ FHA and ECOA reverse-redlining claims to go forward based on allegations that Harbour used standardized, predatory contract-for-deed terms concentrated in predominantly African-American neighborhoods, while dismissing certain consumer-credit and related claims—particularly some TILA claims—on timeliness and other pleading grounds.


Horne v. Harbour Portfolio VI, LP, 304 F. Supp. 3d 1332 (N.D. Ga. 2018)