Move forward to ban 'home equity theft' in Massachusetts
Move forward to ban ‘home equity theft’ in Massachusetts

This contrasts with what happens when a bank seizes a property. In this case, the bank sells the property, deducts from the proceeds what is owed to it, and then returns any remaining balance to the former owner.

Joshua Polk, an attorney with the Pacific Legal Foundation, likened the process in tax lien cases to legal theft.

“When a debt holder takes more than is actually owed, it’s usually called theft, but in this context it’s actually sanctioned by state law,” he said.

These types of transactions can be very profitable for private companies, as illustrated by the case of Deborah Foss, 66, the woman who lost her home in New Bedford.

Speaking at a press conference in Boston announcing the lawsuit, Foss said Tuesday, “I can’t believe this happened to me. It’s cruel and wrong and it shouldn’t happen to anyone else.

Also appearing at the press conference were two members of the Massachusetts House of Representatives, Jeffrey N. Roy and Tommy Vitolo, who sponsored a bill to abolish equity in such cases.

“It’s terribly unfair and needs to stop,” Roy said.

Foss pooled ‘his savings and his inheritance’ to buy a small house in New Bedford in 2015, the lawsuit alleges filed in New Bedford Superior Court.

But faced with a growing list of health problems and living on less than $1,000 a month in fixed income, Foss has fallen behind on his taxes. In 2018, the City of New Bedford elected to sell its tax lien to Tallage Davis, LLC, a Boston for-profit corporation specializing in the purchase of tax liens.

New Bedford and dozens of other municipalities across the state routinely sell tax liens to get delinquency cases off their books.

In the Foss case, New Bedford sold the lien for the amount Foss owed in taxes and interest at the time—about $10,000. There was no mortgage on the property.

The lawsuit says the sale of the lien paved the way for Tallage to take the property.

“By selling the lien, the city transferred to Tallage the power under Massachusetts tax law to collect 16% interest on the tax debt and to seize the property and forfeit all equity in the property if Ms. Foss did not pay the tax debt. “, says the costume.

The foreclosure process started by Tallage dragged through the courts for more than a year. At one point, Foss submitted a written response to the court asking permission to “sell his house to pay his debt and save his capital,” the lawsuit says.

“She did not know her rights or whether she could sell the property without court permission,” the lawsuit states.

At 16% interest, the debt quickly ballooned. In 2019, Foss was told she would have to pay more than $24,000 to “redeem her property and avoid foreclosure,” the lawsuit says.

Several months later, a court granted “absolute title” to the property to Tallage, the lawsuit says.

On March 1, “Tallage sold the property for $242,000, which is at least $210,000 more than Ms. Foss’ total debt,” and about $232,000 more than Tallage had paid the city of New Bedford for the privilege in 2018, according to the suit.

Foss, according to the suit, “has been homeless for [being evicted], living from his car. She does not have the savings or income to find alternative accommodation at this time. »

“If Ms. Foss had known that her entire property was in danger of being taken, including all of the equity she had accumulated in the property, she would have sold the property, applied for a loan, obtained a payment plan or made other arrangements to settle his tax debt to the city before losing everything,” the lawsuit states.

Dan Hill, an attorney representing Tallage, said, “We have followed all legal procedures. There were no shortcuts. Everything was done legally. »

Hill said Tallage incurred about $100,000 in expenses during the process, including the cost of repairing an oil spill caused by a leaking tank in the basement. Even with these expenses, Tallage appears to have made a financial gain of over $100,000.

In one 50 page report published in December, the Pacific Legal Foundation states that “unlike most states, which repay what is not owed to them after paying a property tax debt, the [Massachusetts] The tax lock-in system unfairly takes millions of dollars in real estate capital from homeowners each year – indifferent to the suffering it causes.

More than 150 homes were foreclosed for tax debts by private corporations in the seven-year period ending December 2020, allowing “the taking of approximately $37 million in equity above what these owners owed in property tax debt,” according to the report. .

Last year, the Pacific Legal Foundation represented Mark and Neil Mucciaccio of Easton who had fallen behind on property taxes on the home they inherited and were facing a potential loss of $255,000 in equity. Tallage was about to evict the brothers and their families when the foundation got involved.

But, after the Mucciaccio case was featured in a Globe column, a judge ultimately ruled the brothers could keep their home, based on a family member who had come forward to secure a loan for pay tax arrears.

By the time the Mucciaccio case was settled, Polk said he would find another client to challenge a state law he sees as allowing an excessively excessive government to wrongfully confiscate property.

“We’re not done in Massachusetts,” he said. “Not until this law is declared unconstitutional and struck from the books.”


I have a problem? Send your consumer concern to sean.murphy@globe.com. Follow him on Twitter @spmurphyboston.

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