Banks walk away from homes, cost Washtenaw County $1.5M in chargebacks
Several counties across the state, including Washtenaw County, are dealing with a phenomenon of banks "walking away" from houses despite owing thousands in taxes, according to a Detroit Free Press report.
An abandoned home 2375 Wiard Court in Ypsilanti Township.
Courtesy Ypsilanti Township
Tax foreclosures often lead to chargebacks, which is when the treasurer cannot collect the taxes owed from the bank or owner and the communities are then charged. Chargebacks cost Washtenaw County about $1.5 million.
As an example of ongoing issues with bank tax foreclosures, Ypsilanti Township has sued Germany's Deutsche Bank over property nuisance issues at Wiard Court, the Free Press reports.
AnnArbor.com reported in May that two homes in Wiard Court were uninhabitable, one of which had a yard where raw sewage leaked and kids were discovered to be playing in 2010.
The homes were immediately condemned and residents ordered to leave, but the properties at the time sat in decay. Issues at Wiard Court, an isolated residential pocket near the northwest corner of the Willow Run Airport property, date back to 2006. Other reported issues included a dog fighting operation being busted by LAWNET and 17 pit bulls being rescued from the house.
Read the full story here.
Comments
Stan Hyne
Tue, Oct 23, 2012 : 3:08 p.m.
No person or bank owes taxes on a piece of property. The property owes the taxes. If the taxes are not paid, the property is taken over by the taxing authority.
Chase Ingersoll
Tue, Oct 23, 2012 : 3:53 a.m.
scornwell: Because their are things called rights and due process. For example, let's say that you loaned someone money to buy a car and you were put on the title as the first lien holder. Not only does the person default the note that they agreed to pay you for the loan, but they rack up tickets, fail to pay the registration and injure a pedestrian. The pedestrian sues and obtains a judgement for damages against the owner of the car. They place a lien on the car for more than the car is worth. Should they be allowed to collect the full amount of their lien against you? The law limits the property rights that banks have in regards to property that secures their loan, for the benefit of the property owner. Those rights are limited by public policy, mortgage contract, and code of civil procedure. If you want to change the law so that the banks can come in on a quick take forcible action rather than a 6 to 12 month plus foreclosure procedure, and if you want to give the banks the right to evict tenants that are not keeping homesteads up to subjective standard, or those who miss a tax payment, rather than giving them time to come up with it, then that is an opinion that might hold merit. But to take action against the banks without first placing a legal basis and without understanding their position ? Fine then, you just ended the mortgage business and locked the bank where many of your neighbors may have an account.
swcornell
Tue, Oct 23, 2012 : 3:11 a.m.
If you become foreclosed they come and put a lock on your door. Why doesn't the County just go and lock up one of the Banks Branches until they pay the owed taxes? Why do we let Banks get away with this kind of crap? Here's another thought! Why does Habitat for Humanity need to build houses if there are so many abandoned homes that neither the Bank nor the County wants? Let's get people living in them.
MixedStock
Thu, Oct 25, 2012 : 2:50 a.m.
Habitat in Washtenaw County no longer builds new houses. It takes an old, dilapidated house, strips it bare inside, and rebuilds it. Win-Win.
Chase Ingersoll
Mon, Oct 22, 2012 : 11:08 p.m.
People commenting on this article are demonstrating their lack of knowledge concerning the laws governing financial instruments, securities and property taxes. Property taxes are not a against the owner of the property. They are a judgement against the property. They cannot be discharged in bankruptcy. They are the usually the most secured interest in a property. If I fail to pay my mortgage, the bank can foreclose on me, and that will erase the liens that were filed against the property after my mortgage was recorded against the property. But that foreclosure will not erase the property tax obligations that accrued, even if they were incurred after the mortgage was filed. This is the reason that banks require that all of the property taxes are paid or escrowed for the ensuing tax year, prior to issuing a mortgage or re-financing.. So the County is in a more secure position than the banks when it comes to collecting revenue (arguably revenue that is not really earned - what has your municipality done for you lately). What the COUNTY TREASURER is beefing about is that the County goes ahead and advances the municipalities the assessed tax, before the owner of the property (or bank) actually pays the property taxes. So if the owner walks and the bank walks and the property is such crap that the County's sale of it can't cover the back taxes, then the County has to CLAW BACK what they advanced the municipalities. Hey - in a bubble, its nice doing business, but now with the Municipalities like Ypsi facing an Emergency Manager, this situation is bound to get ugly. But the article as written - I don't think it really explains the various parties obligations or lack thereof and traces the money to identify where the conflict/problem is. I hope I have helped. Chase Ingersoll
GP
Tue, Oct 23, 2012 : 6 a.m.
We all know how smart you are chase. You don't need to be a Smart A$$ when explaining your comment to someone.
Chase Ingersoll
Tue, Oct 23, 2012 : 3:44 a.m.
Ug...my comment is not clear, not being fully read, or people just don't have the context to understand it. Which was the point of it anyway. RU:Kidding: Property taxes are not a liability against the bank or person for which their is any recourse by the holder except as a first lien against the property upon which the taxes were assessed. An income tax lien or any other judgement by comparison can be attached to a property as a lien (still subordinate to property taxes on the property) but also attaches to the person or corporation personally (yes corporation personally) on any of the assets of the person. No person, corporation or bank who walks from a mortgage and/or quits any interest in property has any legal obligation or rationale to pay the property taxes. They can by deed or action, QUIT their interest in the property. As long as the QUIT of CLAIM is unrecorded, property tax bills may still be issued in their name, but they have no legal affect other than allowing the County to take possession of and sell the property.
RUKiddingMe
Mon, Oct 22, 2012 : 11:28 p.m.
Assuming that's all correct, that DOES help, and thanks Chase. However, why would the county pay the property taxes of a property to the municipality? What financial benefit is that for the county? And what would the reasoning for it be? If a bank forecloses (and so now is the owner of the property), do they not assume the obligation of all property taxes, at LEAST from the point of foreclosure forward? And if so, why would the county pay those property taxes on behalf of the bank? Also, it sounds like you're saying that, despite a walk-away by the previous individual, they might avoid the obligation to pay the MORTGAGE, but would STILL be obligated to pay the property taxes. So do those individuals STILL owe that money, and they are not paying it via bankruptcy filing?
RUKiddingMe
Mon, Oct 22, 2012 : 10:20 p.m.
I'm confused. 1) I'm assuming since the banks' action is termed "walk away," that means they have real legal ownership of the property. In other words, it's not PNC selling the mortgage to Fanny Mae and then PNC "walking away," because PNC has no real ownership of that property any more; the sold the mortgage. So when we say "walk away," we're talking about the bank being the one in ownership of the actual property (or the mortgage), as in PNC initiated and did NOT sell the mortgage, but now is walking away. 2) If 1 is correct, how does walking away affect the bank's credit rating? I know individuals can just stop paying the mortgage, leave, and take the credit hit from the foreclosure, but what kind of hit does the bank take? Do they take any reduction whatsoever in their credit rating or reputation? Or does it not even show as a blip, because they own $2 trillion, so defaulting on $200,000 is nothing? And don't rich people who just stop paying and lose a home to foreclosure STILL take a credit rating hit? Like declaring bankruptcy? 3) If the bank can walk away and take no credit rating hit and just leave unpaid bills (the BANK'S bills), then I would say the people need to get together and put some serious effort into making sure the bank sees some kind of negative impact from this. This is legalized deadbeating on a grand scale. There should be some way to legally prove that a bank, if it is solvent, CANNOT walk away from properties leaving unpaid bills. Madoff wasn't able to get away scott free just by declaring bankruptcy. Bansk should not be able to get away scott free just by pointing out the financial advantage of deadbeating certin properties; their asssets should be seized to pay the taxes owed at least. Why would a bank be able to welch on some properties and retain ownership and profit-making interest from mortages on others?
Chase Ingersoll
Mon, Oct 22, 2012 : 7:27 p.m.
The taxes being levied on the homes greatly exceeds the value of the property. Don't blame the banks unless you are prepared to first consider that the excess property taxes were a large part of the reason that the mortgage payer walked from the property. This side of the housing bubble has gotten too little attention - the interest of the public sector in seeing seeing a high number of property transactions for increasingly high values because it generated revenue for the taxing bodies that temporarily balanced their books despite the excessive pay and benefits scales that were negotiated based upon the inflated values. Chase ingersoll
TommyJ
Tue, Oct 23, 2012 : 11 a.m.
I gaurantee you that in that area of Ypsilanti, property taxes weren't the reason why the German bank walked away from those properties.
gsorter
Mon, Oct 22, 2012 : 7:34 p.m.
Chase, I couldn't agree with you more. Many of us assume the assessed valuation must reflect the purchase price. That is not true, especially in the case of foreclosures. We bought a property a bit south of Ann Arbor, and the assessed valuation was TRIPLE what we paid for the property. Took 2 years of expensive legal fighting before it was finally lowered. The burden should be on the township or city to prove the valuation is correct, not on the owner to prove it is incorrect.
Dog Guy
Mon, Oct 22, 2012 : 7:12 p.m.
Non-local bankers at Germany's Deutsche Bank think Zwangsvollstreckung means locking the front door.
jns131
Tue, Oct 23, 2012 : 5:19 p.m.
Ypsi Township is still haggling with a Scotland bank. Go figure.
Macabre Sunset
Mon, Oct 22, 2012 : 6:14 p.m.
It's unfortunate that there are extremists in both parties who simply make up numbers and spout them as fact (some even work for the New York Times, no doubt). According to the Tax Foundation, in 2009 the top 1% earned 17% of all income and paid 37% of all income tax. We can argue whether that's fair, but we should at least stop with the extremist political garbage. It's a shame banks are walking away from homes like this. But the blame must lie on the policies that allowed the guarantee of these loans without any kind of real collateral. Both parties must accept blame here.
Macabre Sunset
Mon, Oct 22, 2012 : 9:39 p.m.
This "growth" comment is silly. It's comparing apples to oranges. When you lump investment income with wages, you get silly results when the stock market crashes and returns. Michigan football was 3-9 in 2008 and 11-2 in 2011 (a gain of 8 wins). Lance Armstrong had 7 Tour de France titles to his name in 2008 and none today ( a loss of 7 wins). Does that mean Michigan football accounts for 800% of the net growth of sports over the last four years? That mathematical "analysis" is about as valid as the one the Times published in that it uses the same methodology.
LXIX
Mon, Oct 22, 2012 : 9:05 p.m.
I stand corrected, I should quote the corporate Koch Bros. et al funded Tax Foundation as the gospel truth. Watch the capitalized words closely. "In 2010, the top 1 percent of U.S. families captured as much as 93 percent of the nation's income GROWTH, according to a March paper by Emmanuel Saez, a University of California at Berkeley economist who studied Internal Revenue Service data". The top 1% o take home 24% of the nation's income (and 93% of its growth) o own half the nation's stocks and bonds and mutial funds. o own 5% of the debt o pay 24% of taxes (according to your source). "In 2009, the top 1% of TAX RETURNS earned 16.9% of adjusted gross income and paid 36.7% of all federal individual income taxes". "The average federal tax rate for those reporting at least $343,927 in INCOME has increased from 22.5% in 2007 to 24.0% in 2009" Correct answer is 24%.
Ghost of Tom Joad
Mon, Oct 22, 2012 : 8:44 p.m.
funny how you deride people for throwing out random numbers and statistics; then proceed to do exactly that, yourself.
LXIX
Mon, Oct 22, 2012 : 4:54 p.m.
How can the 1% earn 93% of all income in the United States (NYTimes report last week). Outsource the unwanted debt to the taxpayer (the poor ones who actually pay their taxes). Fewer people are employed on Wall Street today - but are making record banker salaries (NYTimes report last week).
Stan Hyne
Tue, Oct 23, 2012 : 2:47 p.m.
On what article are you commenting. If the taxes cost more than the property is worth maybe the taxes are too high.
Jake C
Mon, Oct 22, 2012 : 7:32 p.m.
Payroll tax & social security tax, not to mention state income taxes, sales taxes, property taxes, registration fees, etc. What a stupid talking point, that the poorest Americans somehow aren't "paying their fair share when their overall income has dropped dramatically in over the past few decades.
D
Mon, Oct 22, 2012 : 5:37 p.m.
1% pay 3/4 of the revenue to IRS. what taxes do poor people pay to federal government?
Dcam
Mon, Oct 22, 2012 : 5:35 p.m.
It's easy, just follow the Milton Friedman(Univeristy of Chicago)-Noel Tichy(University of Michigan) model of management. It's a clear guide to 'externalizing corporate costs' and maximizing CEO/senior executive compensation - regardless of cost to business or society, to whom the ultimate costs are being externalized.