In the late 1980s and early 1990s, hundreds of homes stood vacant throughout inner North and Northeast Portland neighborhoods, suffering from years of neglect. Homeownership through conventional methods was nearly impossible, as financial institutions often refused to make loans to qualified families in the inner-city neighborhoods because they feared the owners would default. Consequently, property values plummeted, and several real estate companies stepped in to take advantage of the situation. Some were honest, but others were not.

One such dishonest real estate brokerage, Dominion Capital, quietly worked a particular fraud over and over again on unsuspecting families, and in the process made millions.

Typically, Dominion would buy a run-down house at a very low price. By using a false appraisal as proof of property value, it would then sell the house at a substantially higher price with an interest rate well above the market. The contracts were complicated, and seemed to be tailored to each family, but they all shared one important catch: Each contained a balloon clause, with a negative amortization, that required the buyer to pay the entire balance of the contract at the end of the term or forfeit the property.

Few families knew to look for this clause or had the resources to hire a lawyer to review the document for them. Dominion's representatives were friendly and persuasive, and did offer the opportunity to buy a house in the neighborhood in which many of their clients wished to live. Later, when the balloon payment came due, Dominion foreclosed, evicted the homeowners, and inherited whatever improvements they had made. Often the company would then use the house to play the same scam on another family.

Dominion's rental clients fared no better. Often the rental agreements passed the typical responsibilities of a landlord to the tenants. Though few written records of the rental agreements remain, anecdotal evidence suggests that Dominion's primary screening mechanism was whether the tenants could pay the first month's rent in cash.

In the fall of 1990, Dee Lane of The Oregonian wrote a three-part series called Blueprint for a Slum. She argued that market forces had isolated Northeast Portland and that community institutions had abandoned it. Lane documented the fact that conventional lending institutions had redlined the neighborhood, and showed that predatory practices like those used by Dominion Capital ran rampant.

Immediately after the story ran, the Oregon Attorney General's office called for an investigation of Dominion Capital. The company filed for bankruptcy; its principals were eventually convicted in federal court on 32 counts of racketeering and fraud, and served time in prison.

Now attention turned to what to do about the 354 Dominion properties and the families who were now in danger of losing their homes in bankruptcy court liquidation. Neighborhood leaders, the families themselves, government officials, and others brainstormed for solutions and formed a non-profit organization that would work with the neighborhood and the City to acquire the homes. After several years of tense negotiation, the group named Portland Community Reinvestment Initiatives, Inc., or PCRI won the right to buy the Dominion inventory.

First, PCRI set out to replace the land-sale contracts with legitimate mortgages. Through a slow and difficult process, it rewrote and renegotiated the unique land-sale contracts one-by-one. These families were offered the opportunity to buy their home through conventional means and bank financing, finally becoming true homeowners.

Despite some community pressure to sell all of the homes, PCRI's staff and Board of Directors decided to preserve and rehabilitate the remainder of the housing stock as permanently affordable rentals. PCRI offered existing residents leases, and began a five-year, multimillion- dollar rehabilitation project. Both the underlying financing of the homes and the funding for renovation came by way of a large line of credit from US Bank that was guaranteed by the City of Portland.

Several years later, Northeast Portland has changed dramatically. Now the primary concern is no longer community disinvestment, but rather property appreciation and gentrification. A wave of new residents came to Northeast Portland; prices rose as much as 300 percent in some inner-city neighborhoods. There are now few vacant homes in Northeast Portland, and recent studies show that low-income households are being displaced from the neighborhood at alarming rates.

With a portfolio of 352 primarily scattered site, single-family homes, PCRI now represents perhaps one of the last stable opportunities for low- income households to live in a single-family home.

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