The Washington Post published the results of a 10-month investigation into an unpaid housing-tax recovery program in D.C. that has led to over 200 residents losing their homes and another 1,200 active foreclosure cases.
When a homeowner fails to pay taxes on their property, the city sells the amount of the debt to private investors at an auction. The investor then charges interest and fees on the amount, and if the adjusted debt is not paid within six month, is authorized to foreclose on the property.
According the Post, out-of-state companies have been taking advantage of infirm and elderly District residents by purchasing tax liens at auction and charging exorbitant interest and fees. One of these companies was actively under investigation for colluding to rig tax liens auctions in order to purchase the debt at non-competitive prices. After buying the debt at the reduced rate, the companies were free to charge whatever amount they pleased.
One assessed legal fees at the rate of $450 an hour for senior and $325 an hour for junior attorneys, as well as $800 in court fees, including a "dismissal cost" of $27.60. Another charged $25 for preparing a bill, as well as 25 cents per page for the paper it was printed on.
Tax debt that began as low as $100 could quickly balloon to over $1,000 as soon as the city auctioned it off. The Heartwood company, for example, purchased a $535 lien on a homeowner, doubled it to $1,025 and eventually sold the property for $175,000.
Compounding homeowner difficulties is the fact that the city mistakenly sold over 1,900 since 2007, forcing families that had paid their taxes to deal with these companies in expensive legal battles that could last for years. One 64-year-old woman spent two years fighting an erroneous $8.61 interest charge.
The Post profiled the plight of a Vietnam veteran, Bennie Coleman, who currently suffers from mild dementia. Coleman neglected to pay a $134 tax bill, and the city sold the lien to a company owned by Steven Berman, who had been convicted in the aforementioned auction-rigging case. Berman's company charged Coleman $4,999 in legal fees and expenses to lift the lien, but Coleman was unable to pay. The company eventually sold his house for $71,000 two months after evicting him.
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