Government Foreclosure

Op-Ed by Ravi Yalamanchi

Wall Street was blamed for the 2008 recession and the bailout of the banks has never been popular with the main street. Homeowners and business owners losing their property to banks is well known and elected officials have articulated how bad the banks are and they will do everything to make them accountable.

Ravi Yalamanchi

Homeowner’s and business owners’ just did not lose to banks… they have been losing to the government. When a homeowner or business owner becomes delinquent on their property taxes at the end of the year the local government turns it over to the County, which takes the responsibility of collecting it. Many of the small businesses, during the recession, fell behind on their tax liability to IRS, State of Michigan, and County. While IRS is somewhat willing to negotiate and settle the County is prohibited to negotiate under the State Law. It is pay or loose. The County charges 4% admin fees and interest rate of 12% in the first year of delinquency and if it continues into second year the interest rate increases to 18% effective from the date of delinquency plus penalties and administrative fees. The interest and fees over a period of two years amounts to 40%. This would be unconscionable if it were a financial institution. The backlog of taxes over the two to three year period and the accumulation of interest and penalties are forcing small (family owned) businesses into bankruptcy. The decline in property values has further exasperated the struggles of the homeowner and the small business owner. A property owner may have paid of the mortgage but with unpaid property taxes can lose their only asset in a tax foreclosure.

The interest rates being so egregious and since it is the government the State legislature finds this practice perfectly fine. Homeowners and businesses fall behind on paying their taxes not because they don’t want to pay. It is the economic conditions that they face puts them in a hardship. During such hardship the homeowner’s and business owners’ try to make payments as best as they can. Public Act 123 enacted in 1999 changed Michigan from a tax lien to a tax deed state, allowing the government to conduct deed sale for delinquent taxes. This law has affected many seniors and business owners’ during the recession and no relief has been provided. The law shortened the time property owners have to pay their delinquent taxes and speeds up the process for tax reversion. Prior to the change in law local governments could only place a lien.

While the interest rates have dropped during the recession period and continue to stay at historic lows the legislature has done nothing to give relief on the interest rates. County treasurers have been offering hardship extensions but no relief on the high interest rates and fees. With 1000’s of properties in tax delinquency, in every county, it would be of tremendous relief if the legislature took responsibility and changed the law to benefit its residents to preserve their only asset and means of economic security.

Meanwhile there is help for property owners who are delinquent in taxes and/or mortgage. Hardest Hit funds with Michigan State Housing Development Authority, if eligible, will provide a one-time payment toward outstanding county and local property taxes. Go to to apply. The application is very simple and property owners should explore this opportunity.

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