Wednesday, August 19, 2009

Local governments privatize foreclosure for unpaid taxes

Tax Bills Put Pressure on Struggling Homeowners - "With the economy faltering and property values plunging, homeowners and landlords are falling behind on their bills or abandoning their property, just as governments are facing huge budget shortfalls.

Private investors step in and buy tax liens, paying governments upfront all or part of the value of the taxes. The investors then get the right to foreclose on the properties, taking priority over mortgage lenders, and to charge interest rates as high as 18 percent on the unpaid taxes."

Thanks to Fred Pilot for this link. This is called "tax farming." It has been going on for a long time. As with CIDs and red light cameras, the privatization ends up producing a nice payoff for the government, and a big payday for the private corporation, but at the expense of the individual citizen who ends up with no cards to play and takes a big hit. Not that people should get a freebie on their taxes, but should they be paying 18% interest?

1 comment:

Fred Pilot said...

I wouldn't be surprised if delinquent tax debt -- like mortgage debt at the heart of the turmoil in the financial markets -- is also being securitized (i.e. bundled and sold as debt instruments on the financial markets.)

No, delinquent property tax receivables should not incur 18% interest rates charged for unsecured credit card debt.