Government scrutiny of Harbor Portfolio Advisors of Dallas has contributed more baggage to weigh down a would-be sale of Arkansas’ smallest bank.
Two of the three prospective buyers of an 87.3 percent stake in Community State Bank of Bradley (Lafayette County) are affiliated with Harbor Portfolio Advisors: Chad Vose, president of the company, and Farzana Giga, chief financial officer.
HPA, one of the largest sellers of foreclosed homes in the nation, has drawn fire for its alleged predatory lending prices.
The company’s seller-financed home sales and operations attracted the investigative crosshairs of The New York Times last year and more follow-up this year.
HPA’s foreclosure sales practices also have drawn fire from the federal Consumer Financial Protection Bureau and the city of Cincinnati.
A U.S. Appeals Court upheld the CFPB’s subpoena power to investigate Harbor for potential violations of the federal Truth in Lending Act, the Consumer Financial Protection Act and the Equal Credit Opportunity Act.
Cincinnati sued Harbor Portfolio Advisors for unpaid fines and alleged failure to properly maintain dozens of homes sold through a contract for deed.
The action is part of a crackdown on private investment firms that sold foreclosed homes on high-interest installment contracts to poor residents who could not get traditional bank mortgages.
Lex Golden, chairman and CEO of Allcorp Inc., said in a bankruptcy court creditors’ hearing last month that the inquiry into Harbor Portfolio Advisors was a contributing factor in last month’s termination of the proposed purchase of his family’s controlling stake in Allcorp.
Allcorp, the parent company of the $15.5 million-asset Community State Bank, entered bankruptcy court 11 months ago.
Allcorp’s prime debt, secured by all outstanding shares of Community State Bank, is $1.3 million owed to Heartland Bank of Little Rock. Unpaid interest on the loan will total more than $61,900 at the end of June.
Heartland advocates selling the bank to remedy Allcorp’s flagging fortunes. The Golden family thinks the situation can be reversed if the Heartland debt undergoes a generous restructuring.
Community State lost $246,000 last year. The bank recorded a $13,000 loss in the first quarter with total equity capital of $2.6 million.