Rss Feed
Tweeter button
Facebook button
Technorati button
Reddit button
Myspace button
Linkedin button
Webonews button
Delicious button
Digg button
Flickr button
Stumbleupon button
Newsvine button

Treasurers: Counties not ‘cherry-picking’ foreclosures for profit

Not a lot of people want to talk about tax foreclosure.

The long list of names and numbers published in January newspapers don’t mean much to most people.

But for those listed, the people tangled up in the multi-year foreclosure process, the threat of losing their property because of unpaid taxes is a personal, sensitive issue.

More than 1,700 taxpayers and parcel numbers are included in the most recent listing in St. Clair County. They are properties that were forfeited to the county treasurer’s office in 2017 for outstanding taxes from 2015 and earlier. They face possible foreclosure and sale later this year.

A show-cause hearing was slated for January, and a judicial foreclosure hearing is set for Feb. 20.

What happens to them remains as varied as how they first came under threat of foreclosure to begin with. Most won’t be foreclosed, let alone sold to the highest bidder.

Some will be sold, though, and the proceeds used to pay off the overdue property taxes. Sometimes, properties sell for more than the overdue taxes. What happens with the difference is controversial. 

St. Clair and Sanilac counties keep the cash if it surpasses past-due taxes and penalties.

Christina Martin of the Pacific Legal Foundation said that ought to be illegal. 

For counties, “It’s a little like winning the lotto for them,” Martin said.

The Pacific Legal Foundation has sued counties that keep the excess proceeds, arguing that money should go to the people who lost their homes to the tax foreclosure process. An appeal of the lawsuit is pending before the Michigan Supreme Court. 

Lower courts have sided with the counties while the foundation argues it is unconstitutional to take excess foreclosure sale proceeds, especially in instances when the windfalls are massive. In one instance, plaintiff Uri Rafaeli owed just a few dollars on a Southfield property after he miscalculated interest due on a bill, and that grew to $285.

When Oakland County foreclosed, he owed $6,000, according to court documents. His property sold at auction for $82,000, leaving the county a windfall of $76,000.

Martin said Michigan may be the worst state she has encountered “in terms of how they’re handling overdue” taxes. Since the case received publicity last year, however, she said most of the stories she’s heard in response are mostly from struggling taxpayers in Oakland and Wayne counties.

Officials said tax foreclosures are not profit centers for St. Clair and Sanilac counties

“We get these properties through tax reversions so it’s not just something that we’ve gone out and purchased on our own. … And generally when these properties come to us they are here for a reason,” said St. Clair County Treasurer Kelly Roberts-Burnett. “The person who owned it before doesn’t want to maintain it anymore for whatever reason, they’ve gotten behind several years and the property just isn’t worth it anymore.”

She said, “We take these properties, (but) we’re not out there cherry-picking.”

Sanilac County Treasurer Trudy Nicol said, “We’re not experiencing huge windfalls. We’re not getting those (kinds of) foreclosed properties. My goal is to get to zero. I would like to not foreclose on anybody.”

St. Clair County Deputy Clerk Molly Crorey said she has never seen a foreclosure sale “that’s lucrative to the tax fund.”

“If there are years where there is additional (sale proceeds) … usually what we do is we set that aside, anticipating that there may be years where there are shortfalls,” she said.

In St. Clair County, the number of recent tax foreclosure sales are nearly twice as high as they were a decade ago.

Sales first took a massive spike in 2010 on the heels of the economic recession. Peaking at 161 in 2012, they’ve begun to decrease from 153 in 2015 to 101 in 2017.

St. Clair County kept 20.3 percent of its land sale proceeds in 2017.

Because it takes a minimum three years to foreclose on a delinquent property, the treasurer’s most recent annual land sale report shows funds accrued for back taxes and fees owed up until 2014.

And because it goes as far back as the 2003 tax year — entailing some long-entangled properties — a third of those years came back at a net loss for the county.

From the 2003 to 2014 tax years, St. Clair County had $2,745,300 in net revenue from delinquent tax property sales after all taxes and fees from the auctions were paid to the delinquent tax fund.  

After $1.9 million went to contracted services related to the sale and maintenance of the forfeited properties, $60,365 went to publications and $246,258 went to postage, the county turned a $557,671 total profit for the 12 years.

Roberts-Burnett and Crorey said the $557,671 profit is reserved for future environmental cleanups, maintenance and potential litigation.

Most of the money spent on maintaining properties goes to cutting the grass.

“And that’s like after we foreclose,” she said. It’s common for properties not to sell the year they’re foreclosed, she said. Thirteen didn’t sell in 2017, she said.

“Most of the expenses are (like that) on here,” Roberts-Burnett said. “That’s all from managing the process itself — from doing the title search and sending out the notices and that part of it.”

Tax foreclosure sales have also varied over the past decade in Sanilac County — peaking in 2012 at 57 — with a steady decline from 2014 to 23 last year.

A handful of the foreclosed properties didn’t sell and were transferred to the county’s land bank.

Sanilac got about $80,000 in revenue from tax sales in 2017. Of that, it kept a little more than $1,600 after expenses.

“We call that breaking even,” Nicol said.

In 2016, Sanilac made $144,873 but netted a loss of $3,700 after expenses.

Nicol said Sanilac also puts left over funds toward cleanup.

Both treasurers said funds also help pay the salary of staff member who handles tax foreclosures.

‘It’s something they can put off’

A survey of about 20 residential properties in Port Huron on the foreclosure list published in January found many are already unoccupied.

Some are rental properties, such as a home on North Boulevard, where one tenant said they were “very aware” of the issue and had been assured by their landlord it’d be handled before declining to comment.

Mike Bodeis, president of the Port Huron Area Landlord Association, said some landlords are intentionally slow to pay property taxes.

“Twenty-five years ago … the interest was so low, (some) wouldn’t pay them even for a year or two,” he said. “Now, though, they’ve got you. The interest is high. No. 1, it’s a write-off anyhow, and you’re seeing the same names over and over. They don’t mind paying the penalty.”

Others surveyed are homeowners grappling with finances or deciding whether their property is worth keeping.

Clyde White is among the former.

The Port Huron resident said he’s already heard from two “real estate guys” about his home on Vanness Street. The property, which is under both his name and his wife’s, is behind nearly $1,300 in property taxes, according to the county’s recent forfeiture listing. He said it has been an issue for a couple of years, and that they may owe more overall.

Still, White said he didn’t anticipate they’d have any problems settling up before the property goes on the auction block.

On Wednesday, he said, “It (is) like that every year. That isn’t bad, considering.”

Advocates who work with homeowners struggling with tax foreclosures said end up keeping their homes.

Amy Bark is the asset management supervisor at the Blue Water Community Action Agency, which offers programs related to home down payment assistance and financial literacy.

She gets a lot of calls about property tax foreclosures.

“They might be handed down a house and they’re not paying their property taxes, or a family member will call and find out their parents weren’t paying their property taxes,” Bark said. “… By the time they pay the bills, (it can be a problem). It’s not something they see right away; it’s something they can put off.”

Martin of Pacific Legal Foundation said not seeing is a particular risk.

“It’s not just people who are struggling who have lost properties this way,” she said. “It’s also just people who, for whatever reason, didn’t get notice.”

Counties can do a better job getting the word out, she said. Rafaeli, she said, had moved out of state and was renting out his Southfield property and “had no idea he was behind” in taxes.

“If these counties had an incentive to properly warn people, they might work a little bit harder to let people know they’re about to lose their property,” she said.

On Vanness Street, White said multiple family members, including his wife, Tammy, have left the area, and that they needed the time to decide whether to keep the house on Vanness.

“It’s (about) what they’re going to do with the house, everybody’s moving out of town,” he said. “It (isn’t a big) thing. It all depends if she wants to stay here. … I like the neighborhood. (But) if she wants to sell — you’ve got to leave it up to the wife sometimes.”

According to the register of deeds, the Whites are delinquent on both the 2015 and 2016 tax years, owing a total of about $2,700 in base taxes and accrued fees. Records listed online, however, may be out of date by a few months.

According to the state department of treasury, the number of foreclosure sales overall across the state saw the biggest jump in 2010 following the economic recession.

But while foreclosure numbers are on the decline in many areas, the percentage of struggling taxpayers who end up losing their properties has remained about the same.

Most are evading foreclosure.

“Some of it is subjective based on the particular owner and how they manage their taxes,” Crorey said. “Sometimes you get someone who has some really bad luck and it takes them a couple years to get caught up. They take advantage of the programs that assist them. Or maybe there’s some other outside problems that are not making paying their taxes a priority.”

Another home in the 1200 block of Howard Street in Port Huron sold for $3,900 to a contractor in the county’s second 2017 auction last November. Register of deeds records show it last sold in 1988 for $27,000.

As of last September, that property was behind $1,390 in back summer taxes and $180 in interest and $140 in back winter taxes.

Crorey said that property was an example of how the treasurer’s office often ends up holding a property over a long period of time.

“It took us a lot of years with attorneys and other things to finally get a statement from (the property owner’s mortgage lender) that it did not hold an interest in this property,” she said.

When that happens, she said the county spends more than it gets to maintain it.

Like another property on the books from 2006 to 2016 that, she said, ultimately foreclosed for $40,000. She said it made the idea of windfalls seem far-fetched.

“That’s 10 years of grass cutting, that’s 10 years of making sure if someone breaks into the property, (it’s covered) … or if there’s blight or anything like that,” Crorey said. “You get a lot of those that are not representative of the issue.”

In the first year after an unpaid tax year, a property owner will incur a 4 percent administration fee and a subsequent 1 percent fraction of it added monthly, according to the state. A $175 title fee is incurred by March 1 of year two, and the delinquent property forfeits to its parent county.

Following that date, redemption of the debt requires interest at half a percent a month, as well as payment of all fees for services.

Circuit court foreclosure judgments are entered by March 30 of year three. Local units of government are offered first right of refusal before a county’s minimum two auctions are held.

Roberts-Burnett said the county does offer one-year extension on a case-by-case basis to some property owners to keep them out of foreclosure. “Hardship deferrals” require taxpayers to complete an application, which is available through www.stclaircounty.org, and to submit a payment plan, proof of income or copies of their tax returns.

This year, they’re due Feb. 28 for a postponement to pay back 2015 taxes, though interest, penalties and other expenses will continue to accrue.

Roberts-Burnett said St. Clair county grants an average of 155 per year.

Whichever way it swings, Martin said adjusting the burden of a county’s losses from some properties to others it finds more valuable isn’t right.

“In other words, if it’s a burden, you can’t just shift it on to a few people, that’s not allowed,” she said. “Even if the intentions are felt throughout the community as a whole, it wouldn’t be any different than condemning (property) and saying we need it for a road.”

Liz Shepard contributed to this report. Contact Jackei Smith at (810) 989-6270 or jssmith@gannett.com. Follow her on Twitter @Jackie20Smith.

Article source: https://www.thetimesherald.com/story/news/2018/02/09/treasurers-counties-not-cherry-picking-foreclosures-profit/320551002/

Speak Your Mind

*