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The West Dallas businessman who sold more than 100 rental homes to his low-income tenants says he’ll return any equity in the houses to any dissatisfied buyers after two former tenants sued his mortgage company.
HMK Mortgage LLC, a company owned by Khraish Khraish, was sued Wednesday in federal court for alleged violations of consumer protection and housing laws. Two Spanish-speaking immigrants who bought homes that were financed through Khraish’s mortgage company allege they didn’t fully understand their contracts and the consequences should they default on payments.
Julian Campos, a 66-year-old construction worker, said the corner home he purchased in a neighborhood known as Los Altos was a dream. But he grew disillusioned when he came to understand the terms of the sale when they were reviewed by lawyers.
Attorneys for the plaintiffs charge in the suit that there is a "snatch-back clause" that allows HMK to call back the note on the houses at anytime. The contract language also allows for an increase in interest to about 18 percent annually if the borrower is in default, they said.
"If anybody’s dissatisfied with their home purchases, I am more than happy to take back the keys and refund the equity," Khraish, a 42-year-old who has helped managed a large portfolio of aging rentals with his father since about 2003, said Thursday. The rental company operated as HMK Ltd.
"I have a waiting list of 30 people who are willing to buy a home," Khraish said.
But handing over the house keys isn’t an option, said one of Campos’ attorneys.
"The purpose of bring this suit was to ensure that our clients don’t lose their house and get kicked out," said Wayne Krause Yang, a managing attorney with Texas Legal Services Center.
"An offer to take the keys away and shut them out of their houses is not an offer at all but the exact outcome our clients seek to avoid."
Texas Legal Services Center and Legal Aid of NorthWest Texas brought the suit. They were assisted by the Texas Organizing Project, which has fought displacement of renters.
The civil suit is the latest salvo in an affordable housing saga that has been going on for several years in West Dallas, where gentrification is rapidly sweeping through the neighborhoods closest to the city’s downtown.
In 2016, Khraish send notices to vacate to hundreds of his tenants after he said said the city had presented him with the impossible financial task of bringing his old rentals up to a new and tougher housing code.
He notified the city that he was yanking about 300 properties from the market. Rents had ranged from about $300 to $600 in month-to-month contracts for houses of about 600 square feet. Most houses dated back to the 1940s and Dallas County property records listed the condition of many as poor.
HMK landlord Khraish Khraish announced he’d sell the homes to their West Dallas tenants on May 22, 2017. (Tom Fox/The Dallas Morning News)
But renters said the houses and the neighborhoods were home. They put a public face, often a tearful one, on a national housing problem. Public protests, shouting matches, accusations and counter-accusations became regular features of the drama.
Most of the houses were in West Dallas, and a smaller portion were in the Oak Cliff area. Renters were often poor, usually Latino or black.
After refusing to sell any West Dallas houses, Khraish changed his mind and drew up financing contracts through a mortgage company he had set up a few years earlier. Most houses were purchased for about $65,000 at a yearly interest rate just under 5 percent.
Khraish noted that he didn’t charge high interest rates on the loans, "Nor do I plan to exercise what they are calling the snatch back clause," Khraish said. "I don’t understand what the concern is since I have not done any of those things."
Khraish said the documents were lawful and drawn up by mortgage specialists.
From left, interpreter Natali Franco, Julian Campos, Wayne Krause Yang, Mindy Henderson, Ann Maldonado Heaps, Stephanie Champion and Franklin Ortega during a news conference at the home of Julian Campos in Dallas on May 30, 2018. Legal Aid of Northwest Texas and Texas Legal Service center filed a federal lawsuit on behalf of West Dallas residents exposing reverse redlining.(Nathan Hunsinger/The Dallas Morning News)
Khraish’s attorney Charles McGarry said he’d only looked at the lawsuit briefly and didn’t want to comment on it. "I haven’t had time to discuss it with Khraish," McGarry said.
David Villalobos, community organizer with the Texas Organizing Project who worked with tenants, said home ownership was always the goal.
"We look forward to the legal process taking its course," Villalobos said. "We know organizing in the streets of West Dallas will be necessary for them to stay in their homes."