Tax Liens Sold to Investors
Posted by CM on August 28, 2009
Did you know that cities and counties are selling tax liens from unpaid property taxes to investors? Cities are making money from selling liens. Investors are making money from liens by charging double-digit interest rates and adding thousands of dollars of fees1. Plus, investors now hold precedent over the foreclosure proceedings. They can decide to foreclose on the house without the consent of the mortgage servicer and/or bank.
This is an alarming piece of news. This means that if you were down on your luck and had to choose between paying the mortgage or property taxes, most would choose paying the mortgage. From our knowledge up to this point, foreclosures happened because of unpaid mortgages, not unpaid property taxes. Not to mention that cities charge low interest rates and low fees to unpaid property taxes thereby giving you an opportunity to pay the taxes back when you can. Now with investors involved, being able to pay back taxes seems more difficult.
In today’s New York Times Editorial, they noted that subprime loans did not even include property taxes and insurance in the monthly payments2. Sometimes the exclusions were known by the homeowners and sometimes they were not. Clearly this brings to light another bigger problem, the fact that you can still get a lien or go into foreclosure when you had no idea that your taxes were not being paid by your monthly mortgage payments. This is a troubling situation and is another reason why we need a Mortgage Bill of Rights, The Consumer Financial Protection Agency (HR 3126-see right side of this site to track the progress of this bill), and also why the New York Times used this editorial to advocate for “an independent consumer safety regulator for mortgages and other loans—and that the Federal Reserve Board [who wants to regulate mortgages and loans] is not the right choice for the job2.”
1. Tax Bills Put Pressure on Struggling Homeowners. Jack Healy. New York Times. 8/17/09.
2. Another Way to Lose the House. New York Times Editorial. 8/28/09.