Now banks are buying tax liens; more foreclosures follow

Great, yet another thing that might slow the housing recovery. Bear with me as I explain (or go read the full article yourself).

It works like this:

  1. Homeowner falls behind on paying taxes.
  2. Cash-strapped localities sell the tax liens to, well, anyone who will buy them. (Literally.)
  3. The buyers are mainly investment firms and banks, including Bank of America, natch. They take thousands of these liens (each of which may be only a few hundred bucks), blend them together, and package them as bonds for investors. (Sound familiar?)
  4. The law allows them to add interest and fees. (One thing I’m not clear on is how they can charge fees if the homeowner hasn’t signed any kind of contract, but IANAL.)
  5. While homeowners who had trouble paying taxes may have gotten some help from the locality — worked out a payment plan or whatever — banks aren’t as forgiving. They’re happy willing to foreclose.

The end result is that banks — you remember, the folks who begged for a bailout from us? — have found a way to take people’s homes not just if they don’t pay their mortgage, but if they don’t pay their taxes.

But while foreclosing on someone who didn’t pay his mortgage is about recouping a loss, buying a tax lien is strictly about profiting on someone’s misfortune. It’s worse, actually. Foreclosures mean lower property values all around, which makes it tougher on others in the neighborhood, which leads to more missed payments… you get the picture.

Read the full story.

About Andrew Kantor

Andrew is VAR's editor and information manager, and -- lessee now -- a former reporter for the Roanoke Times, former technology columnist for USA Today, and a former magazine editor for a bunch of places. He hails from New York with stops in Connecticut, New Jersey, Cincinnati, Columbus, and Roanoke.
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4 Responses to Now banks are buying tax liens; more foreclosures follow

  1. Tina Merritt says:

    Please stop lumping all “the banks” into one, awful, immoral and criminal group. Yes, there are many who belong in that category; however, there are also quite a few financial institutions (mostly small town banks) that didn’t take TARP funds, have never robo-signed and are not interested in buying tax liens. The real estate industry cannot survive without the banking industry and quite frankly, complaining about the banks does nothing but preach the gloom and doom the media thrives on. Instead, we need to build relationships with banks that share our own ideals and beliefs and encourage our clients to do the same.

  2. You are 100% correct — I should not have lumped all banks together. Smaller banks, credit unions, and the like are certainly the good guys and deserve our support. But I disagree about “complaining”: I think telling people what’s going on and what some larger banks and financial institutions are doing is important. It’s the only way to get pressure on them, either from consumers or government, to change their ways.

  3. Tina Merritt says:

    Sorry Andrew, I respectfully disagree. Our government knows all about what has been going on and has chosen to look the other way. Why do you think the largest bank in the world has been systematically pulling out of the United States since they refused to accept TARP funds (and thus, the government stipulations associated with said funds)? I do agree with you, however, that it is important to call out the banks who do not have good business practices. That way, we, as consumers, can be sure to avoid doing business with them and encourage others to follow our lead.

    By the way…you rock.

  4. Tina’s right. It’s not on the bank that people cannot keep up with the payments of there property. Most people went for homes that they couldn’t afford. Yes, the banks are corrupt, but they’re also trying there best as well to clean up this foreclosure mess that we created as home buyers. There are really no signs for the near future saying that home prices are on the rise!

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