The most important fact in this analysis is the sale price, 25% of the median US home price, despite the fact that this could be some sort of one bedroom condo/apartment/flat/etc. This implies probably low income which carries higher rates of credit difficulty and is manifested by the continual foreclosure rate.
On first sight, it appears as if the first round-trip is simply a mark to market loss, but judging by the trend, it was a mark to model gain.
It should be noted that during foreclosure, the average panic sell price is nearly half of the normal market price; however, in this case, the seller is probably the lender and is not interested in taking such a loss so will negotiate a relatively fair buyback at near market value. The borrower is happy to comply because there is little to no residual recourse.
Here's the rub: in most states, mortgage interest rates are not price controlled. In fact, a friend of mine, who didn't consult his friendly financier, managed to sign a mortgage contract with a floor of about 50% above the recent 10 year average interest rate with a ridiculous ceiling yet had perfect credit.
Smith may seem predatory because of the sub-normal housing and rationally expected continual foreclosure, but in a good ole fashioned free market philosophical analysis, the lender receives an income at high rates of return while the borrower has the chance to acquire a home. The alternatives for this buyer are probably unimaginably worse, and the buyer may have continued payments only to refinance and take away the seller's cash cow. By the law of small numbers, the seller will take a beat on his own game when such an eventuality occurs.
This strategy is difficult to scale. Obviously many properties must be owned to achieve above average income from these investments, and the hidden costs are enormous.