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By Jack Healy - New York Times News Service
Hard times are causing more homeowners to fall behind on their property taxes. And in thousands of cases, they are not responsible to their local governments, but to private companies that charge double-digit interest and thousands of dollars in service fees.
This is because in recent years, strapped cities and counties have sold their delinquent tax bills to the highest bidder. It seemed like a painless way to turn old debts into cash to finance struggling schools or dwindling public services.
But housing advocates say the private firms might be exacerbating the foreclosure crisis, pushing out homeowners faster than governments, which are increasingly concerned about neighborhoods becoming wastelands of abandoned properties.
"In the beginning, you're getting this immediate windfall of cash," said Anita Lopez, the auditor of Lucas County, Ohio, which includes Toledo and which sold off more than 3,000 tax liens for $14.7 million. "But when you think about abandoned properties, foreclosed properties — the cost to the community is far more expensive than the short-term benefits."
Investors say the arrangement benefits everyone. School districts, fire departments and public parks get an infusion of cash. The investors take on a risky but potentially high-yielding investment. And taxpayers do not have to pick up the slack from scofflaw landlords or tax evaders.
With the economic crisis and plunging property values, homeowners and landlords are falling behind on their bills or abandoning their property, just as governments face huge budget shortfalls.
Private investors step in and buy the homeowners' tax debts, paying governments up front all or part of the value of the taxes. The investors then get the right to foreclose on the properties, taking priority over mortgage lenders, and to charge interest rates as high as 18 percent on the unpaid taxes.
"It beats the heck out of any certificate of deposit," said Howard Liggett, executive director of the National Tax Lien Association.
In 2006, Lucas County began selling off its overdue tax certificates to a New Jersey company named Plymouth Park Tax Services, a subsidiary of JPMorgan Chase.
Plymouth Park has filed more than 1,000 foreclosure actions against delinquent taxpayers, more than any single mortgage lender in the county. But it says that it has foreclosed on only 56 of those filings.
Plymouth Park has bought $2 billion in tax liens across the country since 2008 and says the number of foreclosures around Toledo is an aberration.
All told, foreclosures in Lucas County rose to 4,093 in 2008 from 3,486 in 2007, and they are on track to be 7 percent higher this year than 2008, according to county figures.
Plymouth Park's president, John Garzone, said the company tried to set up payment plans with homeowners and foreclosed only as a last resort. The company said the government would most likely have initiated many of those foreclosures on its own
http://www.kentucky.com/216/story/899251.html
Hard times are causing more homeowners to fall behind on their property taxes. And in thousands of cases, they are not responsible to their local governments, but to private companies that charge double-digit interest and thousands of dollars in service fees.
This is because in recent years, strapped cities and counties have sold their delinquent tax bills to the highest bidder. It seemed like a painless way to turn old debts into cash to finance struggling schools or dwindling public services.
But housing advocates say the private firms might be exacerbating the foreclosure crisis, pushing out homeowners faster than governments, which are increasingly concerned about neighborhoods becoming wastelands of abandoned properties.
"In the beginning, you're getting this immediate windfall of cash," said Anita Lopez, the auditor of Lucas County, Ohio, which includes Toledo and which sold off more than 3,000 tax liens for $14.7 million. "But when you think about abandoned properties, foreclosed properties — the cost to the community is far more expensive than the short-term benefits."
Investors say the arrangement benefits everyone. School districts, fire departments and public parks get an infusion of cash. The investors take on a risky but potentially high-yielding investment. And taxpayers do not have to pick up the slack from scofflaw landlords or tax evaders.
With the economic crisis and plunging property values, homeowners and landlords are falling behind on their bills or abandoning their property, just as governments face huge budget shortfalls.
Private investors step in and buy the homeowners' tax debts, paying governments up front all or part of the value of the taxes. The investors then get the right to foreclose on the properties, taking priority over mortgage lenders, and to charge interest rates as high as 18 percent on the unpaid taxes.
"It beats the heck out of any certificate of deposit," said Howard Liggett, executive director of the National Tax Lien Association.
In 2006, Lucas County began selling off its overdue tax certificates to a New Jersey company named Plymouth Park Tax Services, a subsidiary of JPMorgan Chase.
Plymouth Park has filed more than 1,000 foreclosure actions against delinquent taxpayers, more than any single mortgage lender in the county. But it says that it has foreclosed on only 56 of those filings.
Plymouth Park has bought $2 billion in tax liens across the country since 2008 and says the number of foreclosures around Toledo is an aberration.
All told, foreclosures in Lucas County rose to 4,093 in 2008 from 3,486 in 2007, and they are on track to be 7 percent higher this year than 2008, according to county figures.
Plymouth Park's president, John Garzone, said the company tried to set up payment plans with homeowners and foreclosed only as a last resort. The company said the government would most likely have initiated many of those foreclosures on its own
http://www.kentucky.com/216/story/899251.html
