Bailed Banks Reap Profits Buying Homeowner Tax Debt

Friday, August 19, 2011
(book by Chantal Howell Carey and Bill Carey)
On top of the fact that many large banks rescued in 2008 failed to provide substantial assistance to struggling homeowners and small businesses, many of the same institutions are now gobbling up tax liens from teetering homeowners, which may exacerbate the foreclosure problem in the country.
A tax lien is an unpaid property tax or utility bill that, in nearly 30 states, can be bundled and resold to investors, who then acquire the rights to collect that debt.
“In some states, that can mean that you can get 18 percent interest or more on that debt,” journalist Fred Schulte told NPR. “You can also attach a lot of legal fees and other charges onto the debt. So that’s how you make money.”
Since the 2008 bailout, banks have bought nearly 6,000 tax liens totaling $15.8 million in Pima County, Arizona, alone. Financial institutions have done the same thing in other parts of the state and across the U.S., and in doing so are enjoying high interest on the liens.
This practice has led to Americans losing their homes. Schulte told the story of one Baltimore woman who lost her home because of an unpaid $362 water bill. After the debt was sold to a lien holder, double-digit interest rates and fees increased the bill to more than $3,600. The woman couldn’t pay off the amount and wound up getting evicted.
-Noel Brinkerhoff
Bailed-Out Banks Snap Up Tax Liens (by Rob O’Dell, Arizona Daily Star)
Banks and Hedge Funds Move into the Property Tax Collection Business (by Noel Brinkerhoff and David Wallechinsky, AllGov)


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