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Monday, September 24, 2012

Michigan takes on the banks...again...


The State of Michigan has thrown another monkey wrench into the real estate market with a new strategy for trying to collect unpaid non-homestead taxes from banks and government entities that have foreclosed on properties. They are now putting state tax leins on the properties, which is causing many title companies to refuse to write title policies on them. See this news article from the Michigan Associagion fo Realtors web site. There is also a good video on YouTube about this issue at - http://www.youtube.com/watch?v=O__ye32tmms&feature=youtu.be

Basically the argument is that when a bank or one of the governmental (or quasi-governmental) bodies, like HUD or Freddie Mac , takes over a home through foreclosure they become the owners; and, since they are holding the property purely as an investment, they do not qualify for the Michigan Homestead Exemption. That exemption is sigificant, usually impacting taxes by as much as 30%. The Michigan Treasurer is trying to collect those unpaid extra tax dollars from the banks/governmental entities for the time between the Sheriff’s Sale and the sale to another owner.

The banks, et al, are resisting paying, using the argument that they are not really the owners,since the old owners might still be living in the place. That argument is fairly weak, since many homes are abandoned once the bank forecloses and th4e banks themselves often force the occupants out. The banks are just trying to skate of this issue. I suppose the enties like HUD and Freddie Mac are tryign to claim some sort of exemption, based upion representing a hgiher taxing authority.

This has screwed things up in some counties in Michigan (it was first used in Ingam County) because the State has filed tax leins on those properties and those leins don’t show up until a title company does a thorough title search. Once thery do show up the title company will either refuse tro write a title policy or only write one that has a big exception written into it concerning that lein. In most cases the sale won’t close under those circumstances.

For now this is a big game of chicken between the State of Michigan and the banks and entities. Unfortunately the poor would-be buyers of these properties are caught in the middle.  This issue, like the MERS issue concerning robo signing and lack of original mortgage documents, will work itself out over time. I hope the State wins, because it’s just not right that these big banks and entities get to live by a different set of rules than the citizens of the state.

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