Elderly Losing Homes for Owing a Few Hundred Dollars in Back Taxes

In what a new report is calling “a second nationwide foreclosure crisis,” homeowners, particularly the elderly, are losing their homes because they owe as little as a few hundred dollars in back property taxes.  At the same time, big banks and other investors are snatching up these homes for pennies on the dollar and reaping huge profits.

The blame, says the National Consumer Law Center (NCLC) in itsgroundbreaking report, lies with outdated state laws that permit local governments to sell property through a tax lien foreclosure process if the owner falls behind on property taxes, even if the homeowner owes as little as $400.

When a home is foreclosed on for back taxes, banks or speculators responding to “get-rich-quick” Internet schemes swoop in to buy the tax lien.  The homeowner has a limited time to redeem their property by paying the investors the lien’s purchase price, plus interest and fees.  But many state laws permit tax lien purchasers to charge homeowners extremely high interest rates that were set decades ago — as high as 20 to 50 percent.  If, as often happens, the homeowner can’t come up with the cash, the investor sells the house at a huge profit compared to the cost of the tax lien.

For example, an 81-year-old Rhode Island woman was evicted two weeks before Christmas from the home she had lived in for more than 40 years because she had fallen behind on a $474 sewer bill, the report says. A corporation bought her house at a tax sale for $836.39 and then resold it for $85,000.

The report charges that individual tax sale purchasers and large investment companies, including Bank of America and JPMorgan Chase, have used the tax sale process as a profit center.

Most vulnerable are elderly individuals who have fallen into default because they are incapable of managing their financial affairs due to Alzheimer’s, dementia, or other cognitive disorders, the report states.  The loss of a home is particularly devastating for seniors, whose only retirement savings may be their home equity.  Meanwhile, the rules for property tax sales are complex and confusing.

The report estimates that tax lien sales nationwide total about $15 billion a year and are on the rise due to the weak job market, depressed home values, and an increase in mortgage foreclosures.

The NCLC makes a number of recommendations for preserving homeownership while ensuring payment of local taxes, including redemption payment programs, lower investor profits so it is easier for homeowners to redeem their homes, and court supervision of any property sales.

For more on the report, including a press release, a summary of state tax laws and the report itself, titled “The Other Foreclosure Crisis,” click here.

For a CBS News article on the report, click here.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

Medicaid Expansion: What If a State Opts Out?

One of the key provisions of the Affordable Care Act, the new health reform law, gives money to states to expand Medicaid to adults and families with low incomes – a total of about 17 million additional people. However, the Supreme Court recently ruled that the federal government cannot effectively coerce states into accepting the Medicaid expansion by withdrawing all a state’s Medicaid funds if it refuses.  Although elderly and disabled individuals who currently receive Medicaid aren’t affected by the Court’s ruling, it could leave millions of others without any options for health coverage — and possibly cost lives.

The Affordable Care Act expands Medicaid eligibility starting in 2014 to individuals and families with incomes up to 133 percent of the poverty line, which is $14,856 for an individual in 2012. (Most states currently limit Medicaid to certain categories of people at or below the poverty line, including children, pregnant women, parents of eligible children, people with disabilities and elderly needing long-term care.) The federal government will pay the complete cost for the Medicaid expansion for three years for newly eligible beneficiaries, and 90 percent of a state’s costs thereafter.

Nevertheless, the governors of several states, including Texas, Louisiana, and Florida, have said they will not accept federal money in order to expand coverage.  Although politics is undoubtedly playing a role in these pronouncements, some are worried about the costs associated with expanding Medicaid, despite the federal money. On the other hand, some analysts predict that expanding Medicaid could actually lead to savings, in part because uninsured individuals already cost states billions of dollars.  Arkansas officialsestimated the expansion would save the state $372 million in the first six years.  Another recent study found that when states have expanded their Medicaid programs in the past, fewer people have died.

If a state opts out of the expansion, then adults who earn too much to qualify for Medicaid but too little to qualify for tax subsidies to pay for private health insurance will be left without coverage. People in those states who earn less than 100 percent of the federal poverty limit ($11,170 for an individual) and are not eligible for Medicaid benefits would also not be eligible for tax credits to purchase otherwise unaffordable private insurance. If the state chooses to expand Medicaid, those people would be covered. For more information on this looming coverage gap, click here.

For more information about the debate taking place in states about whether to opt out of the health care expansion, click here and here.

For a Kaiser Commission brief titled “How will the Medicaid Expansion for Adults Impact Eligibility and Coverage?,” which includes a state-by-state breakdown of current Medicaid eligibility, click here.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.