Lien on me

How banks can take your home for pennies on the dollar

It sounds very American: For 46 years, Grace Brockington has called the Parkland neighborhood home. In 1965, she and her husband, Tommie, bought a white two-story house with a fenced-in backyard. With Grace working as a dietary aide at St. Mary’s & Elizabeth’s Hospital, and Tommie, an Army veteran with 22 years of service, working full time at General Electric, they raised 10 children there.

But when Tommie, the family bookkeeper, died in 1998, a property tax bill managed to slip through the cracks — nearly dragging Grace down with it into a netherworld of recessionary financial gamesmanship.

“I don’t remember ever getting a property tax bill for 1999,” says the 76-year-old Brockington. “The first I knew that it was not paid was in 2008 when I got a letter from a lawyer saying I owed $285.”

The lawyer was a representative of Woodford Finance, a third-party organization that had purchased the $91.97 lien on Brockington’s home from the Jefferson County Clerk’s Office.

For the uninitiated: A lien is an unpaid tax or utility bill that can be placed on a property as a means to collect debt. And since Kentucky is one of 29 states in which that debt can be repackaged and sold to other parties, there is money to be made.

In this case, Woodford Finance found Brockington’s property on a lien list published by the Jefferson County Attorney’s Office and so, like any enterprising business, went about making as much money off of the initial $91.97 as possible.

Fortunately for Woodford Finance, Kentucky is a state where the law makes it pretty easy to do just that. After buying the lien from the clerk, the company can collect pre-litigation attorneys’ fees usually equal to the amount of the initial lien (e.g. $91.97). To sweeten the pot, they can charge an additional $100, calling it “administrative fees”: Hence the puzzling request for $285. So before a lawsuit had even been filed, Woodford had already managed to turn a profit on the back of a septuagenarian and the daughter she was forced to borrow money from in order to make ends meet.

“I called the lawyer and said I could not pay him this month,” she says. “Social Security was my only source of income … (and) I had already used this month’s check to pay for my living expenses. When I finally paid the lawyer the next month, it was too late. They had filed a foreclosure against my house for $91.97.”

And there you have it. Effortlessly, a measly property tax bill had been dug up, dragged to Woodford Finance’s laboratory and mutated into a hideous Frankenstein intended to scare an elderly woman out of thousands of dollars.

“Obviously the worst part is that they can foreclose,” says Stewart Pope, advocacy director for the Legal Aid Society. “And they’re entitled to get some attorney fees and things like that. So what starts out as a hundred dollar bill ends up being a couple thousand dollars.”

In Brockington’s case, the amount was nearly $1,800, most of which was wrapped up in the ballooning costs associated with attorneys’ fees that can skyrocket once foreclosure litigation has been filed.

“We typically see the older folks that are looking at a foreclosure on their house for a bill that started out as $100, $200, you know?” Pope says.

Brockington’s lawyer, John Young of the Legal Aid Society, echoes Pope, saying that older populations are typically preyed upon in this type of financial scheme.

“The way that I see it is that she’s an older lady,” Young says. “It was so little money that it was inconsequential, and then she gets a letter nine years later out of the blue demanding $285? I think a lot of people would look at that as a scam, but she didn’t. She calls them up, says she’s going to make good on it, and they file a foreclosure lawsuit. From what I found, there was no way I could defend against it. I think that her case is one of the harsher ones, although certainly not the harshest — she got to keep her home.”

Since financially vulnerable senior citizens clinging to the trappings of middle-class life represent such a stereotype in the national consciousness, it should be no surprise then that, like any stereotype, they have become a lucrative demographic upon which an entire industry derives profit.

Enter Tax Ease Lien Investments 1 LLC. Like Woodford Finance, the Dallas-based Tax Ease is a third-party lien purchasing company that Young calls one of the biggest in the state. In terms of lobbying power, he’s quite right: According to the Kentucky Legislative Ethics Commission, Tax Ease Lien Investments has nine lobbyists scurrying around Frankfort as you read this.

As a result, the system is streamlined in a state like Kentucky to keep the money flowing to companies like Woodford and Tax Ease — all at the expense of people like Brockington.

“I imagine that there are a great many elderly folks out there who are being foreclosed upon because of these tax liens,” Young says. “Luckily, I think I’ve been able to save a number of them, but I think there are certainly a lot of people I haven’t been able to help who have multiple liens. Once one goes through, and then those fees start to stack up, it’s hard for me to come back and save them. The costs get so high, it’s almost impossible to catch up.”

As to ending up in this situation in the first place, Young says all it takes is missing one payment or fitting a vulnerable profile. Last summer, he and a law student went door-to-door in the city to discern why older populations were incurring liens more regularly than other demographics.

“We wanted people who lived in homes worth less than $80,000, and then we did door knocking,” Young continues. “We went out and asked them, ‘Why haven’t you paid your property taxes? What’s going on in your life that you haven’t paid these bills?’ And we found that, in a lot of cases, a lot of the folks were people who were living day to day, barely able to manage their own affairs, and some had the early onset of dementia.”

For Brockington, it was the loss of her husband that set these events in motion.

“When Tommie died, I had to manage the finances all by myself,” she says. “I felt betrayed because my family had served this country. My grandfather, my brothers and my husband all served in the military. It felt like I was not given a fair chance.”