WASHINGTON (AP) — The District of Columbia government allows private investors to pursue foreclosure on hundreds of homes over unpaid tax bills, but many of the debts are less than $500, a newspaper investigation has found.

The Washington Post reported Sunday that for decades the district government has placed liens on properties when homeowners did not pay their tax bills. The liens are sold at public auction for investors to collect the debts.

But the program has grown into a system where $500 tax bills morph into $5,000 debts as private investors charge homeowners thousands in legal fees and other costs, the newspaper reported.

Since 2005, investors have foreclosed on nearly 200 houses and are now working to take 1,200 more homes. Many of the houses are owned free and clear by families. In dozens of cases, the original tax liens were less than $500.

Retired Marine Sgt. Bennie Coleman, struggling with dementia, lost his home two years ago over a $134 property tax bill. A woman lost her home to a Maryland investor over a tax debt of $45 while she was struggling with Alzheimer’s disease. A 65-year-old flower shop owner lost his home in Columbia Heights after a Florida company paid his $1,025 tax bill and then took his house that was valued at $169,000.

More than half the foreclosures were in the city’s two poorest wards, the Post found.

The district government has done little to shield the most vulnerable homeowners from predatory practices, while other cities and states have taken action to curb abuses and cap fees charged by private investors.

The D.C. Office of Tax and Revenue also sold nearly 1,900 tax liens by mistake in the past six years, forcing homeowners into legal battles.

Tax lien purchasers defend the system.

“This is an opportunity to make some money, but it is also an opportunity for the city to get paid and to help its citizens,” said Richard Cockerill, a tax lien bidder from Virginia.

The D.C. tax office said property owners are given “multiple opportunities to pay both before and after the tax sale.” The office recently stopped selling liens on debts of less than $1,000 to help manage its caseload, officials said.

“The tax sale is the last resort. It’s also the first resort — it’s the only way in the statue to collect debt,” said Stephen Cordi, the district’s deputy chief financial officer.

Housing advocates proposed a list of reforms to the D.C. Council last year, including offering payment plans to struggling homeowners and capping fees charged by lien purchasers. But no changes were made.

“That’s a failure on the part of government,” said Stephen Fuller, director of the Center for Regional Analysis at George Mason University. “This has punitive consequences. People have been damaged.”

Information from: The Washington Post, http://www.washingtonpost.com

(Copyright 2013 by The Associated Press. All Rights Reserved.)


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