How You Can Lose Your Paid-Off Home

Localities sell your unpaid bills to investors who foreclose
By Caroline Miller,  Newser Staff
Posted May 19, 2010 1:44 PM CDT

Vicki Valentine's father paid off the mortgage on their home a quarter-century ago, but she's been foreclosed on and evicted anyway, thanks to a $362 unpaid water bill. Valentine's one of a growing number falling prey to “tax sales,” the Huffington Post reports. Basically, the city sold Valentine's debt to an investment bank, which piled on fees and interest until the bill was more than $3,600. When Valentine couldn't pay, it seized the house.

Such sales are a booming business. Local governments are strapped for cash thanks to the recession, and investors know they'll find many who can't pay, or can't pay quickly enough to avoid big fees. Some state lawmakers in Maryland, where Valentine lives, have tried to curtail the practice, but to no avail; proponents argued that the threat of eviction kept residents paying their bills. And the investors say they're providing a valuable service. “We are essentially the city's bill collector,” says one. (More foreclosures stories.)

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