The residential sale/leaseback/buyback transaction is a socially beneficial foreclosure rescue transaction that is being regulated increasingly by the criminal courts to the detriment of the homeowners, investors, and society at large. Because the transaction is being regulated more aggressively with the criminal law, peculiar outcomes arise, which include investors being sentenced, in some cases, to draconian sentences --a trend that will eviscerate the transactions rather than improving them.
In calling for a retreat from that position, this Article makes both descriptive and prescriptive claims. The first descriptive claim is that the transaction is a beneficial one and that it has valid, non-fraud raisons d'etre. The second descriptive claim is that the level of persecution of this transaction is escalating for several reasons. Those reasons emerge from a perfect storm of social, political, and economic factors, the desire to criminalize unconscionability, which largely has been obliterated as a civil contract doctrine, and the triumph of behavioral economics over rational choice economics in homeowner advocacy jurisprudence. The first prescriptive claim is that criminal regulation creates more harm than it cures by eroding the institution of contracting and by exacerbating the very market failure that gives rise to the transaction. The second prescriptive claim is that, where there are problems with the transaction, there are several better alternatives to criminal regulation. Specifically, minor licensing and regulation and remedial civil dispositions create better outcomes than criminal dispositions.
Cori Harvey, "We Buy Houses": Market Heroes or Criminals? 79 Mo. L. Rev. 649 (2014).