Minor Tax Liens Are Creating a Second Foreclosure Crisis

State and local governments are taking a swing at homeowners who are behind on local property tax and utility payments, causing a second wave of home foreclosures. Property owners who are unable to pay a few hundred dollars on, for instance, a sewer bill are losing their homes almost before they even realize there is a problem.

Outdated laws are allowing some county and municipal governments to sell overdue tax liens to investors. The tax liens are usually due to unpaid:

• Property taxes
• Sewer fees
• Water bills
• Other municipal bills

Investors purchase the overdue tax bills from local municipalities, obtaining legal claims on homeowners' properties. Taking over tax liens is attractive to investors because many states allow them to charge interest rates over 18 percent, sometimes up to 50 percent. If the property owner is unable to pay the investor, it can foreclose on the home.

Purchasers of the tax liens are not subject to the same rules and regulations that apply to mortgage lenders. As a result, notices provided to owners behind on their taxes are not required to be easily understood. Collectors can prey on the elderly, disabled and those for whom English is a second language by using confusing legal terms and burying remedies in the fine print.

Source: CNN Money, "The other foreclosure crisis: Losing a home over $400 in back taxes," Les Christie, July 22, 2012.

Our law firm helps individuals and small businesses resolve tax issues.