How Big Banks Can Steal Your Home From You Even If Your Mortgage Is Totally Paid Off

Did you know that the big banks have a way to legally steal your house from you even if you don’t owe a single penny on your mortgage?  Big banks and hedge funds are buying billions of dollars worth of tax liens from local governments all over the nation, and they are ruthlessly foreclosing on homeowners when they can’t pay the absolutely ridiculous penalties and legal fees that are tacked on to the original tax bill.  As you will see below, one 76-year-old man lost his $197,000 home that he fully owned over a $134 tax bill.  A 95-year-old woman lost her $300,000 home over a $44.79 tax bill.  This is a very, very dirty way to make money, and the predatory financial institutions that are involved in this business definitely do not want to talk about it.

Of course much of the blame should also be shouldered by the local governments that are coldly selling these tax liens to these ruthless predators.  If local governments want to collect their tax bills, they should do it themselves.  They should not be auctioning off their tax liens to cold-hearted financial institutions that are very eager to commit a legal version of highway robbery.

A few days ago, the Washington Post reported on the tragic story of a 76-year-old former Marine named Bennie Coleman.  Coleman had originally purchased his home with cash, but that didn’t stop tax lien predators from stealing his home over an unpaid $134 property tax bill…

On the day Bennie Coleman lost his house, the day armed U.S. marshals came to his door and ordered him off the property, he slumped in a folding chair across the street and watched the vestiges of his 76 years hauled to the curb.

Movers carted out his easy chair, his clothes, his television. Next came the things that were closest to his heart: his Marine Corps medals and photographs of his dead wife, Martha. The duplex in Northeast Washington that Coleman bought with cash two decades earlier was emptied and shuttered. By sundown, he had nowhere to go.

All because he didn’t pay a $134 property tax bill.

So why couldn’t he pay such a small bill?

Well, as the Post explained, these big banks and hedge funds keep tacking on interest, penalties and legal fees until the tax bills are many times the size that they originally were.  When the distressed homeowners can’t come up with thousands of dollars to pay off the debts, the big banks and the hedge funds move in for the kill…

For decades, the District placed liens on properties when homeowners failed to pay their bills, then sold those liens at public auctions to mom-and-pop investors who drew a profit by charging owners interest on top of the tax debt until the money was repaid.

But under the watch of local leaders, the program has morphed into a predatory system of debt collection for well-financed, out-of-town companies that turned $500 delinquencies into $5,000 debts — then foreclosed on homes when families couldn’t pay, a Washington Post investigation found.

In particular, hedge funds have discovered that this is a great way to make huge piles of money.  The following is a short excerpt from a CNN article that was published back in May

With buyers identified only by numbers or unrelated names, the fragmented, unregulated industry is opaque. Even the market’s size is debated — $15 billion a year, according to Howard Liggett, the chief executive of Distressed Real Estate Consulting Services, or $5 billion a year, according to the National Tax Lien Association, a trade group. While returns are a closely kept secret, investors typically make between 2.5% and 10% a year, or in the low teens for larger buys.

“The hedge funds are chasing yield in this business” says Albert Friedman, a principal at Alterna Capital, an alternative investment firm in Boca Raton that buys tax liens.

Insiders estimate hedge funds now control 40% of the tax-lien market, from under 5% five years ago, with regional banks, obscure partnerships sporting names like God’s ATM LLC, and mom-and-pop investors making up the rest.

And a number of “too big to fail” banks are involved in this business as well.

In a previous article, I described exactly how this works…

1) The big Wall Street banks set up or invest in shell companies that will disguise who they really are.

2) These shell companies run around and buy up all of the tax liens that they can get their hands on.

3) Predatory levels of interest (in some states as high as 18 percent), fees and penalties rapidly pile up on these unpaid tax liens.  The affected homeowners quickly end up owing much, much more than what the original tax bills were for.

4) If the collecting firm has to hire a lawyer, then that gets charged to the homeowner as well.  The bloated legal fees for some of these lawyers can end up being the biggest expense of all.

5) If the tax liens do not get paid, the collecting firms move in to foreclose as quickly as legally possible.

According to the Huffington Post, Wall Street banks such as Bank of America and JPMorgan Chase have been gobbling up several hundred thousand tax liens from local governments.  It appears that “distressed housing markets” are being particularly targeted.

Many of these tax liens are sold in online auctions, so it is unclear if many local government officials even realize who the big money behind many of these shell companies is.

These big financial institutions may consider this to be “good business”, but the truth is that they are absolutely shattering lives in the process.  This is particularly true when it comes to older people that do not fully understand what is happening to them.  Just consider the following examples from a recent Washington Post article

A 48-year-old math teacher paid his taxes in 2007, but the tax office took his $1,400 payment and applied it to the wrong house, crediting an entirely different taxpayer.

A 58-year-old bank employee almost lost her house in 2010 because the tax office mistakenly sent bills and notices to a wooded lot across from a strip shopping center in Virginia — 12 times.

A 69-year-old hat designer was given the wrong payoff amount and ended up in court to save her property, owned by her family since 1943.

Those homeowners found out about the mistakes in time to fight. Ninety-five-year-old Daisy Dolsey, living in a nursing home and struggling with Alzheimer’s, wasn’t so lucky: She lost her $300,000 house over a $44.79 tax debt even after she paid her taxes.

Doesn’t that just sicken you?

And then the big banks and the hedge funds have the gall to wonder why people dislike them so much.

In this day and age, large financial institutions have become more cold-hearted than ever before.

Always make sure that your property taxes are fully paid, and always keep a paper record of all financial transactions involving your home.

If you do slip up and make a mistake at some point, there is a very good chance that a ruthless financial institution will try to swoop in and steal your home right out from under your nose.

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  1. problem is , when ever I tell poeple I vote 3rd Party ,they respond I am wasting my vote , They do not see that they are holding on to the 2 party coruption . Every time I hear a politician talk about how he is working- look at all the bills he has passed .. I think of 2 things
    1] he did not write the bill [up to 88% of bills are written by the industry that the bill is supposed to control ]
    2] Jesus warned us about Saducces & Pharisis and how they passed to many laws , now we have our gov doing the same thing [ and acting like it is a good thing ]

  2. YOU, LIKE MOST PEOPLE, ARE KIND OF MISSING THE POINT!!! I bash Republicans because many of them are clear and deliberate tools of the Republican dominated Corporate Hierarchy that actually runs this country! MOST Republicans are OK people, and have NO clue that their party is THE party that Corporate Fascists are using to subvert and gain ever greater control of this nation. SOME DEMOCRATS ARE INVOLVED IN THIS, TOO… BUT… You CANNOT be a successful Democrat and be too much of a tool of Corporate America!!! Most voters are terribly uninformed and misinformed, but they are not necessarily stupid! Most politicians are pretty much totally honest, BUT they can be lied to and can be misled, just like most people can be. AND THAT IS THE CENTRAL PROBLEM IN OUR AGE… WE LIVE IN A HIGHLY COMPLEX WORLD WHERE TRUTH AND BLATANT LIES ARE HARD TO TELL APART! The Corporate Fascists are taking full advantage of that situation… by stirring up blatant lies about our government and our politicians, they are driving a HUGE wedge between the people and their government. REPUBLICANS ARE MUCH MORE LIKELY TO GO ALONG WITH CONSPIRACY BECAUSE ALMOST EVERYTHING THAT MAIN LINE REPUBLICANS BELIEVE IS CONSISTENT WITH WHAT THE CORPORATE CONSPIRATORS WANT THEM TO BELIEVE. So, people who consistently vote Republicans are directly supporting the overthrow of their own democratically elected government, AND they are dooming their own kids and grand kids to the kind of Fascist Aristocracy that our own founding fathers fought to overthrow! THOSE WHO VOTE REPUBLICAN ARE DIRECTLY SUPPORTING THE SAME KIND OF DICTATORSHIP THAT REPUBLICANS SAY THEY ARE STRONGLY OPPOSED TO… AND THEY WILL NOT LISTEN TO THOSE WHO CAN SEE THIS HAPPENING AND WHO WARN THEM ABOUT THIS!!! Some Democrats can see what is happening, and are doing everything they can to prevent such a coup… Bernie Sanders, a true Socialist, and a few others come to mind… BUT MOST DEMOCRATS SEE ONLY SYMPTOMS, SUCH AS THE GROWING GAP BETWEEN RICH AND THE REST OF US, AND OTHER STUFF LIKE THAT. So, they cannot see the forst for the trees, and thus cannot see a clear way out of the forest. WHICH IS EXTREMELY TRAGIC, BECAUSE, EVEN NOW, WE COULD STOP THE RIGHT WING CONSPIRACY IN ITS TRACKS WITH JUST A FEW RELATIVELY MINOR CHANGES IN THE WAY WE DO THINGS!!! Getting rid of a few tax breaks, for example, could take a TRILLION DOLLARS A YEAR out of the pockets of the far right super rich who are using all of that money against our best interests. And the political will needed to pass such laws could be used to make a few more changes that would, in effect, totally short circuit the Far Right and their Fascist tactics and strategies… BUT ANYONE PROPOSING SUCH CHANGES WOULD BE ATTACKED VICIOUSLY AS SOCIALISTS AND COMMUNISTS AND LIBERALS! One guy who is quietly TRYING to bring about such changes is BARRACK OBAMA, believe it or not! And Republicans have mostly succeeded in branding him as a radical Liberal… as a SOCIALIST… and as such, he no longer has the support of a solid majority of Democratic voters, and has nothing but hatred from Republicans! And the very grim truth is that… after Obama… WHO WILL BE ABLE TO GET ELECTED FOR ANY OFFICE IN AMERICA IF THEY EVEN TRY TO STAND UP AGAINST THE RIGHT WING FASCISTS??? The answer is, most likely, NOBODY!

  3. @JohnDille:disqus Most Mortgage Corporations are Democrat-Owned. Fannie and Freddie were regulated by Frank-Dodd (again, Dems), forcing lenders to give loans to those who could never afford them, so as not to appear racist. This, over time, caused the housing crisis we have now. Democrats and over-regulation. Please check your facts, and your ideology at the door.

  4. Did democrat tried to stop or reverse the Bush II economy or financial polices when they both controlled the House and Senate? NO.

    The concentration of wealth to the rich and put government to huge deficit did not started during the Obama administration though he also helped this trend also. We know the trend has continued by more than three decades.

    Therefore, tombmanager is correct, it’s a cooperation on both parties. Republicans pushed it in a faster way while the democrats did it in a bit more slower and smarter fashion. They both were making sure the trend would not be reversed, and you cannot only blame one side.

    Every problems like government medical system and extremely low tax rate to the rich that you mentioned are true, but you cannot only blame the republicans, since both parties has corporations at their back. It’s the corporations want to cut back all the social services, and you can see both parties are pretty submissive to their master when they make the polices. Saying the republicans doing all the evils is actually irresponsible, since democrats did have opportunity to changes things.

    tombmanageris right again that we need to get rid of the current awful politicians in both parties. You can do it by building an independent or third party, or just people started to elect correct people into the field in all local, state, and federal level, which is well explained in Hermes Mercury’s comment on this article.

  5. Glad someone else sees the corporations are getting this money . So many people did not see this or know it when Medicaid part b/d got started . And it still amounts to , to much spending by our government . they took the over-view of the money from Social security which was rated by the GAO as the most efficient agency in the gov and passed it out to corporate profiteers ..

  6. If my experience is a guide, big businesses and governments outsource all of these and put in specific processes designed to keep their outsourced help ignorant-all in the name of security. Granted, social security numbers and account numbers are confidential. That being said is it SO necessary to make it extremely difficult to allow a hapless bureaucrat to fix an error? There are so many roadblocks put up that the ONLY way to get this fixed is to BE a royal pain in the rear, so much so that just to get rid of you they’ll fix it. But you better believe that the next time you call, it will be IMPOSSIBLE to speak to a human.

  7. GOVERNMENT OVERSPENDING IS NOT REALLY THE PROBLEM!!! The REAL problem is what those monies get spent on! THINK OF IT THIS WAY… total business revenues will total almost 40 TRILLION this year… at least 7 or 8 times greater than ALL government SPENDING…local, state, AND National… COMBINED!!! This ratio of business revenues to government revenues has actually increased dramatically in recent decades, as Republican policies allow businesses to steal more money from all the rest of us, AND cut what government takes in!!! IF GOVERNMENT REVENUES HAD KEPT PACE WITH CORPORATE AND BUSINESS REVENUES AND INCOME OF THE TOP 10% OVER THE LAST 30 YEARS, THERE WOULD BE NO FEDERAL DEFICITS AND NO FEDERAL DEBT!!! But Republicans sponsored tax cuts for big business and for the very wealthy have put TRILLIONS in the pockets of the wealthy, which they have used to destroy our economic system, drive down wages and destroy jobs for the middle class, AND TO BANKRUPT GOVERNMENT AT ALL LEVELS!!! Meanwhile, Republicans have FORCED government to give away TRILLIONS to the rich and to giant corporations, AND to spend trillions more supporting programs that benefits mostly the rich and their corporate plantation systems! CONSIDER MEDICARE AND MEDICAID, WHICH STARTED OUT AS A VERY GOOD AND AFFORDABLE WAY TO HELP OLD PEOPLE AND POOR PEOPLE GET ACCESS TO AFFORDABLE HEALTH CARE… but Republicans and their corporate masters EXPLODED the system by adding on services and driving up costs that effectively channel many hundreds of billions of dollars directly to the richest people in America. medicare and medicaid represent well over half of all entitlement spending, but not a penny of all that money goes to poor people or to old people… it all goes directly to the medical system!!! HOW MANY REPUBLICANS WILL EVER POINT THAT OUT TO YOU??? All Republicans do is to call poor people moochers,,, WHEN IN FACT THE RICH ARE BY FAR THE BIGGEST MOOCHERS IN AMERICA!!! And the Republican party is funded by and serves those moochers very well!!!

  8. YOU ARE 99% CORRECT… and I truly wish that all the folks that keep calling politicians corrupt would take a lesson from MACHIAVELLI.. whose brilliant concepts, stated over 500 years ago, guide wise voters and politicians to this day… ONE OF HIS TEACHINGS WAS THAT PEOPLE WHO BLAME POLITICIANS FOR CORRUPTION ARE CORRUPT THEMSELVES… they weaken the political system by libeling it and by encouraging people to avoid dealing with the political system altogether… IF YOU REALLY THINK THE SYSTEM IS CORRUPT… STAND UP AND CHANGE IT… OTHERWISE IT IS YOU WHO ARE CORRUPT!!! But, as noted above, you are ONLY 99% correct!!! There really are corrupt politicians owned and controlled by corrupt businesspeople, and ordinary folks and other businesspeople and other politicians fail to do anything about them!

  9. Liens are placed on a property when taxes are not paid. Usually a county waits for three years before offering the lien at a tax sale. These “banks” aren’t stealing anything! Anyone can sign up to purchase a tax lien. Call your county assessor. Most states have a program for seniors to avoid a tax payment–it’s added up and upon a sale of the property–usually death of the occupant–the taxes are paid from proceeds.
    Tax liens are usually offered by the assessor after three years of non-payment by the owner. The buyer can demand payment from the owner plus a percentage–usually at least 12%. The property owner is given one year to redeem the property; or, the purchaser of the tax lien owns the unit.

  10. you are so right – both parties have to go – we need an independent or libertarian very soon before this country end up in chaos….

  11. it is not just REPUBLICAN , It is politicians in general who keep on over spending on every thing……………….

  12. So stop it — the myth that the corporation or anyone else owns the politicians is just that, a myth. The VOTERS own the politicians, others only rent. So, this is clearly a terrible terrible method of doing business — therefore PRESSURE – not a few people, but millions – PRESSURE and there will be a new law that bars this practice. Stop b*tching and start acting.

    Further, you want action that changes things? Vote in more Elizabeth Warrens. The PEOPLE control, period. So seriously, coalesce – frankly, if you really want change, on the Left – whether you want to or not – and put in politicians that will obey your needs — and then just end it.


  13. WELCOME TO THE NEW WORLD ORDER… A GLOBAL CORPORATE DICTATORSHIP BROUGHT TO YOU BY AMERICA’S REPUBLICAN DOMINATED CORPORATIONS AND THEIR REPUBLICAN… mostly… POLITICAL PROSTITUTES!!! Now aren’t YOU proud you keep voting Republican. even though those dang Liberals have been warning you not to for decades??? Just be glad that you live in America… this global dictatorship is REALLY hurting people badly in places all over the world that most Americans have never heard of, and care nothing about!!! Enjoy your Wal-Mart products, produced with slave labor and imported into the United States with the blessings of the new Republican dominated Corporate Dictatorship… where the corporations are so powerful that they can BYPASS AND IGNORE AND RIDICULE EVEN THE PRESIDENT OF THE UNITED STATES…which they routinely do… even while they are blaming him for what is happening!!!

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