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Predatory tactics: Homes lost for failure to pay property taxes

Here’s an instructive though disheartening tale about predatory tactics employed against homeowners, some of whom lose their houses despite having substantial equity in their properties or even owning them outright.

The story comes from the District of Columbia, although it can easily enough resonate with readers in Florida and everywhere else where foreclosures are a large and persistent concern.

Imagine the following scenario. A family owns its home free and clear, but, owing to financial difficulties, falls behind on property taxes owed on the homestead. Local government authorities take a lien on the property and then sell that instrument to a private party.

That new lien holder is typically a private investor -- increasingly, a well-heeled company -- that seeks to make big profits on the debt. What has happened in Washington, D.C., in an increasing number of cases is that lien holders are tacking on legal fees, interest charges and other costs in excess of the amount actually owed.

The unfortunate result of that in a growing number of instances is that the face amount of an original debt can become multiplied many times over.

When that happens, investors holding liens are invoking their legal right to foreclose on indebted properties. In the District of Columbia, that means that a house can be lost outright, with whatever equity a homeowner has in the property being stripped away in favor of the tax lien buyer.

The results have been outrageous, with dire outcomes being especially visited on elderly and vulnerable homeowners.

The process “is destroying lives,” says one local professor and commentator on the matter.

Local officials defend the process, saying that many homeowners simply wouldn’t pay their debts in the absence of its coercive reach.

A recent Washington Post article states that about 1,200 homes in the District are potential targets owing to their owners’ failure to pay property taxes.

Source: The Washington Post, "Homes for the taking: liens, loss and profiteers," Michael Sallah, Debbie Cenziper and Steven Rich, Sept. 8, 2013

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