Woman Sees Her Home Confiscated Over a Water Bill

Continued from previous page

Investing in liens can be risky, with profit on a particular property anything but certain. Investors generally compensate for such uncertainty by buying in large volumes, sometimes at a clip of thousands of liens each year.

Two of the investors who pleaded guilty in the bid rigging case  made at least $10 million from fees and other costs collected from owners of some 6,000 property liens they bought over six years, according to federal prosecutors.  

Prosecutors said in court filings they suspect bid-rigging occurs in other areas of the country. A JPMorgan subsidiary called Xspand and at least two other companies received grand jury subpoenas last year as part of a Justice Department anti-trust investigation in New Jersey,  according to Bloomberg. 

‘Unintended Consequences’

Some state lawmakers have questioned the fairness of the tax sale foreclosure process,  which often sticks homeowners with thousands of dollars in legal fees and other costs. But cities and counties in Maryland earlier this year fended off an effort to keep water bills out of the tax sale, arguing that without the threat of losing homes many people would fail to pay their bills.

Revenue collectors defend their tax sales as a necessary, if sometimes distasteful, means for feeding the public treasury. In aging cities such as Baltimore, there’s also hope that new owners will rehab decaying or abandoned properties, restoring them to the tax rolls .

Investors say they aren’t the bad guys – they’re providing a service that helps plug holes in municipal budgets. Homeowners should face consequences for failing to pay their bills, they argue, noting that people faced with losing property have many opportunities to redeem it. The mounting fees, they say, reflect the costs involved in navigating complex legal requirements, tracking down property owners and taking them to court to enforce the liens. In Valentine’s case, they noted, a judge approved the fees.

“We are essentially the city’s bill collector,” said lawyer and tax lien investor Reiff.

Critics of tax sales question the morality of government tax collectors acting to enrich private investors at the expense of property owners with low incomes or facing hard times. They ask whether it's the best way to compel people to honor their debts — especially involving relatively paltry public utility bills.

After all, when water bills go unpaid, some cities and counties simply shut off service. In Baltimore, officials often leave it on. Another alternative would be to have private collection agencies track down debtors.

“This is a case where good intentions have led to severe unintended consequences,” said Debra Gardner, of the Public Justice Center in Baltimore, a non-profit advocacy group for minorities and the poor.

Asked about Valentine’s story, David Vladeck, director the Federal Trade Commission's Bureau of Consumer Protection in Washington, said it was “just horrifying to me."

While noting that his comments did not reflect agency policy, Vladeck said he believed more recession-wracked homeowners across the country could face a similar plight. “It’s beyond tragic that this poor woman lost her home.”

Pleas – and More Fees

Valentine was incredulous when the price to keep her property shot past $3,600. Jobless and lacking the savings to pay, she said she could do little to stave off the day of reckoning.

That day arrived on February 3, when a Baltimore City Sheriff’s Department deputy served her with a court-issued “writ of possession” stripping her claim to the home.

Valentine, a former mental health counselor and rehab specialist with four children, said she moved back to her childhood home about a decade ago to care for her ailing father, Charles L. Turner. A retired brewery worker, he had Alzheimer’s disease.