The Foreclosure Report

Tax Lien Buyer Gets To Play Scrooge

This report from Philadelphia shows the tax lien angle isn't a slam-dunk. "Two dozen Philadelphia homeowners and foreclosure-relief advocates gathered outside yesterday's biweekly sheriff's sale in West Philadelphia to urge a New York company to relax its demands for cash from owners of thousands of city homes on which taxes are long overdue."

"MBIA had guaranteed a $75 million bond issue by the Philadelphia Authority for Industrial Development in 1997. The bonds were supposed to be financed by revenue from taxes through liens filed against delinquent taxpayers. But 'the performance of the tax liens was much worse than projected,' MBIA told the SEC in a financial report last year."

"As a result, MBIA had to pay $46 million to cover the unpaid Philadelphia taxes when the bonds came due in the summer of 2004. By paying off the bonds, the company gained the right to collect the taxes, and offset at least part of its costs, from Philadelphia property owners. The firm told its shareholders that it hoped to recover at least $20 million 'in net future collections that will be used to reimburse MBIA' for part of its losses. In the fall, the firm's attorneys sent out letters demanding payment and threatening foreclosure."

"A majority of the homes are vacant, agreed protest organizer John Dodds, of the Philadelphia Unemployment Project. But thousands of the homes are still occupied, and the letters threaten to foreclose on some of the city's poorest homeowners, who inherited losses greater than their properties' values, in some cases, when they took over the homes from former owners."

"Gloria Sanchez said she and her husband bought the rundown shell of a Howard Street home in Kensington for $1 last year from her former landlord. But after her husband's death later in the year, Sanchez received a letter from attorneys for MBIA saying they owed $10,000 in back taxes that previous owners had racked up before 1997. 'We didn't have that money,' Sanchez said, 'and we didn't know where we were going to get it.'"

"Dodds said one elderly homeowner in Germantown was told she ought to stop her cable-television service and use the money to help pay her taxes. He called that demand unreasonable, arguing that cable TV was important to maintaining the largely homebound woman's quality of life."

posted by Ben Jones @ 7:07 AM