This is outrageous

Deborah Foss of New Bedford is 66. A few years ago, she used her life savings and an inheritance to buy, outright, a small, modest home. Even though her monthly retirement income was miniscule, she thought she was set for life.

Then Foss fell on some hard times. She began experiencing health issues. Barely existing on monthly income of less than $1K, she fell behind on her property tax payments. 

So in 2018, New Bedford sold its tax lien on her Foss' home to an outfit called Tallage Davis, LLC, a firm with a nifty ka-ching business: acquiring tax liens and turning around and selling the properties they foreclose on for big bucks. (There arebucket firms, and then there are scum bucket firms.)

Here's how it works (for the Tallages of the world) or doesn't (that would be for the Deborah Fosses of the world):

Once the company takes over the lien it is allowed to charge 16 percent interest on the outstanding back taxes. If the homeowner still cannot pay, the company can foreclose on the property and evict them. After paying the taxes, it gets to keep the remaining equity in the property — which could be hundreds of thousands of dollars. (Source: Boston Globe)

Which is precisely what happened to Deborah Foss.

Given the extortionary interest rate Tallage was allowed to charge, Foss' debt grew, and all of a sudden she was faced with coming up with $24K - quite a bit more than the original $10K she owed - or having her property foreclosed. With Foss unable to come up with that kind of money, Tallage took possession on her home. 

On March 1, “Tallage sold the property for $242,000, which was at least $210,000 more that Ms. Foss’s total debt,” and about $232,000 more than Tallage had paid the City of New Bedford for the lien back in 2018, the suit says.

This is quite a bit different than what happens when a bank forecloses on a property. 

In that case, the bank sells the property, deducts from the proceeds what it is owed, then returns any remaining equity to the former owner.

This is admittedly an apples-oranges situation. Foss owed taxes, not a mortgage, which she didn't have. Still, under this scenario, Foss would have walked away with enough money to get herself better situated, and maybe even getting to enjoy the rest of her life, however meager her income. 

Instead, Foss finds herself homeless, living out of her car.

A small public interest law firm (with a libertarian bent) has filed a suit on Foss' behalf, claiming that she was duped. 

“Had Ms. Foss known that her entire property was at risk of being taken, including all the equity value she had built up in the property, she would have sold the property, sought a loan, secured a payment plan, or made other arrangements to satisfy her tax debt to the city before losing everything,” the suit says.

Massachusetts is one of the minority of states that allows for this practice, and the lawsuit is hoping to result in "a ban on what it calls 'home equity theft.'" 

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

"Cruel" and "wrong." Couldn't have said it any better myself.

Two state reps are proposing a bill that will outlaw this cruel and wrong practice, which in Massachusetts in the last seven years has gouged about $37M in equity "above what the homeowners owed in property tax debt."

Good for them. I'll be writing my state rep, Jay Livingstone, to support this bill.

As Deborah Foss said, "It shouldn't happen to anyone else."

Amen to that.