Home equity theft kicks homeowners while they’re down
A recent story about Geraldine Tyler in Reason went something like this: 94-year-old Tyler fell behind by $2300 on her property taxes. Interest and fees came to $15,000. The government foreclosed, sold the home for $40,000, and kept the remaining $25,000.
Right or wrong, most of us know that government can seize property to collect a debt. The question is, if the seized property is valued more than the debt, where does the rest of the money go? Should the government be allowed to keep more than it is owed (plus reasonable fees and expenses)?
According to Pacific Legal Foundation, Nebraska is one of twelve states that allow home equity theft, that process whereby the owner of a property, upon falling behind on their property taxes, is effectively bought out (in Nebraska’s case) by a private entity that takes on the tax debt in exchange for a tax deed from the county, and then forecloses on the owner and sells the property. Notifying property owners about all of these actions is effectively non-existent in Nebraska. Sometimes, the first time the owners hear about it is when they are notified that they must leave their homes.
Attorneys who practice in this area of law throughout the country point out that most of the time, those who fall victim to home equity theft are elderly or have had other medical expenses or family financial circumstances that have caused them to fall behind in their tax payments. Indeed, sometimes–as was the case with Kevin Fair of Scottsbluff—a house that is paid for and has no other liens can be a total loss for those who have spent years making mortgage payments and paying taxes.
This year, two bills in the Nebraska Legislature are seeking to address problems attendant with tax liens.
One, LB154 introduced by Sen. Wendy DeBoer, is narrowly tailored and seeks to improve the noticing requirements for treasurer’s tax deeds. This would at least give owners better notice that action is about to be taken on their property and potentially allow them to cure the owed taxes.
The second bill, LB577 introduced by Sen. John Cavanaugh, is a more expansive bill seeking to end home equity theft altogether. In addition to tightening up notification requirements, this bill would require the tax foreclosure to go through the judicial foreclosure process already found in Nebraska statute. While a property sale may still happen to collect back taxes, any equity that remains after the sale (and all lienholders are paid) would go to the original owner.
We at the Platte Institute are happy to be working with Sen. Cavanaugh, as well as our friends at Pacific Legal Foundation, ACLU of Nebraska, and Legal Aid of Nebraska to protect property rights for all and to stop home equity theft.
See the current status of the bill here.