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This week The Washington Post is reporting on how hundreds of D.C. residents have lost their homes to tax debt in the last several years, with one homeowner owing just $44 in property taxes before she faced foreclosure. According to the Post investigation, it's because of a D.C. government program that turns private investors into debt collectors for the city. Post reporter Debbie Cenziper talks to WAMU Morning Edition host Matt McCleskey about the impact of this program. Following are highlights of the conversation.
On how some D.C. homeowners end up facing foreclosures over small amounts of debts:
"They owed very little money, and they didn't pay their taxes, and the District sold the liens to private investors, who not only charged interest on top of the tax debt, but when they moved to foreclose in court, they tacked on thousands of dollars in legal fees, which can turn a $134 debt into a $5,000 debt, which is exactly what happened..."
On how long the tax debt would have to go unpaid for the debt to be sold, and then for it to go into foreclosure:
"The tax liens are sold generally about a year after the homeowners fail to pay. And then they will be sold at action, and then about six months later, tax liens investors will file in court, and immediately start charging these high legal fees. There are no caps in the law, there are no limits on these fees, so property tax investors can pretty much charge without they want."
On the people most affected by these practices:
"Mostly the elderly — very elderly homeowners, people who are struggling with Alzheimer's. One man who was in a coma and under hospice care... also people who sometimes forget to pay their bills, or they're very low income homeowners and they just don't have the money to do it."
On why the city decided to hand this process off to investors:
"That was really the turning point of why some people would call it a predatory system of debt collection. In 2001, the D.C. Council took the foreclosure process out of the hands of the tax office, and they allowed these out-of-town investors to head to court to close. They allowed the investors to tack on legal fees and court costs — again, with no caps in the law. And so the fees could be thousands and thousands of dollars.
On what kind of measures are in place to protect vulnerable homeowners:
"Some would say very few. The District does offer what they call upfront protection for the elderly, so they give them breaks on their taxes. But when they become delinquent, when they miss a bill, there are no protections. So liens have been sold in the District for just a couple of hundred dollars... the tax office pretty much steps out of the process once the lien is sold. It's between the homeowner and the tax lien purchaser."
On how these practices and safeguards compare to other parts of the country:
"A couple thousands cities and states sell tax liens. This is not a unique program. It's not a new program. The District has been doing for a 100 years — more than 100 years. But many other jurisdictions offer these protections. They will not even allow investors to buy liens on homes owned by the elderly. They have caps in the laws, they set thresholds so that the leans aren't sold for $100 or $200, and some states and cities have scrapped selling tax liens altogether."
On what kind of profit investors are making from this D.C. program:
"In one case, a person owed $134, and the tax lien investor tacked on $5,000 in fees, and the person lost his house, and the investor went on to flip it for $200,000."