A new study by the National Consumer Law Center said outdated state and local municipality laws are making it possible for people who are delinquent on their property taxes to lose their homes. For as little as $400 owed in property taxes, local governments are placing tax liens on the houses, seizing the property, then selling the tax liens to big banks and other investors.
According to the consumer group's study, the elderly and poor are particularly vulnerable because of outdated laws and misinformation. Local governments are squeezing every little be they can out of their tax revenues in this weak economy. However, the study shows that the victims are people who are already in trouble and cannot manage their finances. In addition, the communities most affected are often minority-heavy neighborhoods throughout Massachusetts that were abused and targeted by subprime lenders.
The consumer group is advocating for a change in the laws and processes to make it easier for homeowners to maintain their home after a tax lien sale by limiting the interest rate and required fees. They would also like to see the law change to allow for payment plans and increased notification so residents understand their rights and the process.
Tax lien sales are different than foreclosures because the homeowners are not behind on their mortgage payment, just the property tax owed. Tax liens allow your home to be sold for the mere amount of the property tax that you haven't paid. Meaning, your $100,000 home could be sold out from under you for about $600.
Don't let this happen to you. Contact a tax attorney and have your homeowners insurance and property taxes taken right out of your monthly mortgage payment through an escrow account.
Source: Daily Reporter, "Some homeowners lose houses for a little as $400 in overdue taxes, consumer group says," Daniel Wagner, July 10, 2012