On the day Bennie Coleman lost his house, the day armed U.S. marshals came to his door and ordered him off the property, he slumped in a folding chair across the street and watched the vestiges of his 76 years hauled to the curb.
Movers carted out his easy chair, his clothes, his television. Next came the things that were closest to his heart: his Marine Corps medals and photographs of his dead wife, Martha. The duplex in Northeast Washington that Coleman bought with cash two decades earlier was emptied and shuttered. By sundown, he had nowhere to go.
All because he didn’t pay a $134 property tax bill.
The retired Marine sergeant lost his house on that summer day two years ago through a tax lien sale — an obscure program run by D.C. government that enlists private investors to help the city recover unpaid taxes.
For decades, the District placed liens on properties when homeowners failed to pay their bills, then sold those liens at public auctions to mom-and-pop investors who drew a profit by charging owners interest on top of the tax debt until the money was repaid.
But under the watch of local leaders, the program has morphed into a predatory system of debt collection for well-financed, out-of-town companies that turned $500 delinquencies into $5,000 debts — then foreclosed on homes when families couldn’t pay, a Washington Post investigation found.
As the housing market soared, the investors scooped up liens in every corner of the city, then started charging homeowners thousands in legal fees and other costs that far exceeded their original tax bills, with rates for attorneys reaching $450 an hour.
Families have been forced to borrow or strike payment plans to save their homes.
Others weren’t as lucky. Tax lien purchasers have foreclosed on nearly 200 houses since 2005 and are now pressing to take 1,200 more, many owned free and clear by families for generations.
Investors also took storefronts, parking lots and vacant land — about 500 properties in all, or an average of one a week. In dozens of cases, the liens were less than $500.
Coleman, struggling with dementia, was among those who lost a home. His debt had snowballed to $4,999 — 37 times the original tax bill. Not only did he lose his $197,000 house, but he also was stripped of the equity because tax lien purchasers are entitled to everything, trumping even mortgage companies.
“This is destroying lives,” said Christopher Leinberger, a distinguished scholar and research professor of urban real estate at George Washington University.
Officials at the D.C. Office of Tax and Revenue said that without tax sales, property owners wouldn’t feel compelled to pay their bills.
“The tax sale is the last resort. It’s also the first resort — it’s the only way in the statute to collect debt,” said deputy chief financial officer Stephen Cordi.
But the District, a hotbed for the tax lien industry, has done little to shield its most vulnerable homeowners from unscrupulous operators.
Foreclosures have upended families in some of the city’s most distressed neighborhoods. Houses were taken from a housekeeper, a department store clerk, a seamstress and even the estates of dead people. The hardest hit: elderly homeowners, who were often sick or dying when tax lien purchasers seized their houses.
One 65-year-old flower shop owner lost his Northwest Washington home of 40 years after a company from Florida paid his back taxes — $1,025 — and then took the house through foreclosure while he was in hospice, dying of cancer. A 95-year-old church choir leader lost her family home to a Maryland investor over a tax debt of $44.79 while she was struggling with Alzheimer’s in a nursing home.
Other cities and states took steps to curb abuses, such as capping the fees, safeguarding houses owned by the elderly or scrapping tax sales altogether and instead collecting the money themselves.
“Where is the justice? They’re taking people’s lives,” said Beverly Smalls, whose elderly aunt lost her home in Northeast Washington. “It’s just not right.”
In a 10-month investigation, The Post chronicled years of breakdowns and abuses in a program that puts at risk one of the most fundamental possessions in American life.
Every Wednesday, homeowners plead their cases at D.C. Superior Court, where they are pitted against industry lawyers who have filed for more than 7,000 foreclosure cases in the past eight years alone. Families pace the hallways waiting for their names to be called in last-ditch efforts to rescue their homes.
“This is highway robbery,” said Brenda Adjetey, who showed up in court last week to protect her home in Southeast Washington after her $1,100 tax bill nearly quadrupled because of legal fees charged by the investor.
Tax lien purchasers defend the industry, saying that most people who buy liens are local investors just trying to earn interest — not take homes — and that the law gives owners six months to repay their debts before a foreclosure case can be filed.
“This is an opportunity to make some money, but it is also an opportunity for the city to get paid and to help its citizens,” said Richard Cockerill, a veteran bidder from Virginia.
In a written statement, the tax office added, “Property owners are given multiple opportunities to pay both before and after the tax sale.”
Officials also said the tax office has made improvements to the program in recent years, including additional warnings to homeowners before liens are sold, and the office recently stopped selling liens on houses for less than $1,000.
But officials acknowledge that limit was set to manage the caseload and is not a permanent policy change.
At a public hearing this past October, housing advocates presented a list of reforms to the D.C. Council, including capping the fees charged by purchasers and offering payment plans to struggling homeowners. But the changes were never made.
“That’s a failure on the part of government,” said Stephen Fuller, director of the Center for Regional Analysis at George Mason University. “This has punitive consequences. People have been damaged.”
There is so much more information here to learn about how bad this is and it will even get worse!
This is sad.
All these evil doings from the the hotbed of the party of tolerance. NOT!!!!!!!
Welcome to obummers world.
You would figure that by the time these people have retired they have paid their share of property taxes and should be exempt if they are living in a home they or their spouse paid off.
Back in the '90's I walked into my local congressman's office and asked: Why do you have a flag in your office that is flying under Admiralty Law? I was looked at like I had 4 heads and had lobsters crawling out of my ears. I was then told that the fringe was purely decoration, to which I protested and demanded an answer from the congressman. I was told to stop back in a few days. I had no expectation of recieving a proper answer before or after I entered the congressman's office. Upon my return, I was given the same lame response that the fringe was purely decoration.
I remember in 1970 or 1971 while I was in elementary school I noticed that the flags had been removed from the lunchroom. I was informed that the flags were not proper because they had gold fringe which signified that we were under Admiralty Law, so the school removed them and was awaiting new flags.
Folks, Nothing is going to change until the politicians at all levels, the press, police, courts and schools fear the inevitable meeting with Christ more than they love money and power.