Local governments looking to make ends meet are seizing homes from owners behind on their taxes. Investors on Wall Street are the ones who reap the profits.
A report from a consumer group released today says that vulnerable owners are losing their homes for owing as little as $400 in back taxes.
The AP reports:
"Outdated state laws allow big banks and other investors to reap windfall profits by buying the houses for a pittance and reselling them, the National Consumer Law Center said in a report being released Tuesday.
"Local governments can seize and sell a home if the owner falls behind on property taxes and fees. The process helps governments make ends meet at a time when low property values and the weak economy are squeezing tax revenue.
"But tax debts as small as $400 can cause people to lose their homes because of arcane laws and misinformation among consumers, says John Rao, the report's author and an attorney with NCLC."
The report details how the process works. In most cases, companies like JPMorgan Chase and Bank of America buy tax liens from the city and eventually evict the original owners. The investors then resell the house for a hefty profit. A $200,000 home, for example, might be sold on tax lien sale for $1,200.
Nationally, NCLC reports annual tax lien sales total $15 billion and the elderly and disabled are the most vulnerable.
In its report, NCLC recommends that states revisit their laws by, for example, limiting the profits of investors and limiting the kinds of fees they can charge for owners to get their house back. NCLC also recommends that a court authorize the final sale of the property.
All of that is important, but perhaps more poignant are the stories NCLC has collected. Here are a couple of them:
"An 81-year-old Rhode Island homeowner was evicted two weeks before Christmas from the home she had lived in for more than 40 years because she had fallen behind on a $474 sewer bill. A corporation bought her house at a tax sale for $836.39 and then resold it for $85,000."
"Betty Museus had lived alone for many years in her home in Missoula, Montana. With no close family to assist her, she fell behind on her property taxes. Her home was purchased at tax sale by Virginia-based Mooring Tax Asset Group for the $5,822.09tax debt. Ms. Museus did not respond to letters sent to her by Mooring and she failed to redeem the property. Mooring evicted her, eliminating the remaining equity in Ms. Museus' house, valued at $150,000."