A pro bono project started by lawyers at Morgan Lewis & Bockius in Washington DC is helping retirees keep homes they own free and clear. Similar projects may begin in New York City and Philadelphia to ward off a growing problem affecting the elderly and their homes.
It seems the elderly (who long ago paid off mortgages on houses now worth hundreds of thousands of dollars) who fall behind on ever rising property tax bills, risk losing title to their homes to someone who paid as little as a few thousand dollars to buy the tax lien, which debt can quickly grow and lead to foreclosure.
Here’s what happens:
Let’s say they miss a property tax payment. Cities and counties are required to file tax liens against the property. Often, governments are then forced to sell off the tax liens to third parties, who become legally entitled to collect the outstanding debt, PLUS a surcharge of 5 percent, according to established national standard, PLUS 18 percent interest AND penalties, until restitution is made. It doesn’t take long for the debt to rise quickly and repayment made difficult, if not impossible.
The homeowner gets tax bills twice a year, and constructive notice 60 days before a tax sale,” said Michael J. Wilson, Esq. of Morgan Lewis who began the pilot project. “But practically speaking, he has no idea of the trouble he’s in.”
Generally, said Wilson, the hottest properties are homes worth about $300,000 on the open market, with an outstanding tax bill of about $2,000. “You could buy the lien for that amount plus a few thousand more to buy out other liens, and you walk away with a tax sale certificate,” he said. “You wait six months, then you go down to Superior Court and file an action to foreclose with right of redemption.” (Homeowners in Washington, D.C., have no ability to make installment arrangements with property tax collectors and are left to the harsh reality of the legal process.)
“It is entirely common that a house in New York City worth $800,000 can have its tax lien sold for as little as $10,000, with foreclosure to ensue”, said Lee Fiorino of NYC’s Dept. of Finance.
Oda Friedheim, a staff attorney for the Legal Aid Society of New York, said elderly people desperate to keep their homes often turn to predatory lenders.
They get scammed by one-stop-shopping outfits run by brokers who call themselves ‘home-savers,’” she said. “These brokers push abusive refinance loans. And sometimes the homeowner is even tricked into signing over a deed. They think it’s refinancing; they think it’s just one more paper to sign in a big stack of papers.
Daniel G. Fish, Esq., a partner in the elder law firm Freedman Fish & Grimaldi, said that legal housing issues are the number one problem faced by the elderly.
If you have elderly clients or clients with elderly parent, pass this article on to them.
Learn more about the pro bono work being done by Morgan Lewis here.
Source: The Legal Intelligencer.
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