Nearly a dozen major banks and hedge funds, anticipating quick profits from homeowners who fall behind on property taxes, are quietly plowing hundreds of millions of dollars into businesses that collect the debts, tack on escalating fees and threaten to foreclose on the homes of those who fail to pay.
The investors, which include Bank of America and JPMorgan Chase, have purchased from local governments the right to collect delinquent taxes on several hundred thousand properties, many in distressed housing markets, the Huffington Post Investigative Fund has found.
In many cases, banks and hedge funds created new companies to do their bidding.
In exchange for paying overdue real-estate taxes, the investors gain legal powers to collect the debts and levy fees. At first, property owners may owe little more than a few hundred dollars, only to find their bills soaring into the thousands. Some jurisdictions tack on bills, such as for water, sewer and sidewalk repair.
(Reuters) – The Internal Revenue Service has launched a review of the tax-exempt status of a widely-held form of mortgage-backed securities called REMICs.
The IRS confirmed to Reuters that the review comes in response to mounting evidence that banks violated tax requirements by mishandling the transfer of mortgages to REMICs, short for Real Estate Mortgage Conduits.
Have multiple relatives en route to my home this morning, but wanted to post a few thoughts on an interesting story that came out this week before I disappear into a weekend of overeating and meaningless NFL games.
The piece, which came out Thursday, is the Washington Post’s feature on MERS, the electronic mortgage registration company that is at the center of the foreclosure/mortgage bubble mess. MERS is the brainchild of the mortgage-lending industry and is essentially an effort at systematically evading taxes (more on that in a moment) and hiding information from homeowners in ways that enabled the Countrywides of the world to defraud investors and avoid legal consequences for same.
The idea behind MERS was to wipe away centuries of legal tradition that mandated the physical transfer of loan notes and ownership information. Whereas lenders once were required to physically register with county clerk offices every time a mortgage loan was extended or re-sold, MERS provided an “electronic registry” of mortgage notes where all such transfers were recorded in the wiry brain of a giant computer instead of on paper.
By Fred Schulte Huffington Post Investigative Fund
Posted: 10/19/2010 01:00:00 AM MDT
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Nearly a dozen major banks and hedge funds, anticipating quick profits from homeowners who fall behind on property taxes, are quietly plowing hundreds of millions of dollars into businesses that collect the debts, tack on escalating fees and threaten to foreclose on the homes of those who fail to pay.
The investors, which include Bank of America and JPMorgan Chase, have purchased from local governments the right to collect delinquent taxes on several hundred thousand properties, many in distressed housing markets, the Huffington Post Investigative Fund has found.
In many cases, banks and hedge funds created new companies to do their bidding.
In exchange for paying overdue real-estate taxes, the investors gain legal powers to collect the debts and levy fees. At first, property owners may owe little more than a few hundred dollars, only to find their bills soaring into the thousands. Some jurisdictions tack on bills, such as for water, sewer and sidewalk repair.
Some states allow the investors to bill for up to 18 percent interest and a passel of legal fees and other charges. When property owners fail to make full payment, the investors can sue to foreclose — in some states within as little as six months.
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