Detroit mayor pushes bills for tax delinquency relief

Chad Livengood
Detroit News Lansing Bureau

Lansing — The Michigan Senate is considering legislation designed to help some of the 62,000 Detroiters facing foreclosure for delinquent tax bills stay in their homes next year.

The Finance Committee on Wednesday advanced a bill to the floor after hearing testimony from Detroit Mayor Mike Duggan on why homeowners need a break on interest and fees for overdue tax bills that can exceed the value of their house.

The House-passed bill would allow county treasurers to create installment payment plans for homeowners who fall behind on their taxes and remove their home from foreclosure proceedings if they make the first initial payment.

Treasurers also could waive interest penalties for homeowners who complete the payment plan, according to the legislation.

A separate bill pending on the Senate floor would allow county treasurers to lower the interest charged on tax bills from 18 percent to 6 percent to make monthly payment plans more affordable over a period of five years. Rep. John Walsh, R-Livonia, is sponsoring that bill.

“We’re not doing you a lot of good giving you a five-year loan at 18 percent,” Duggan told the committee.

Under the legislation, if the total tax bill is more than 25 percent a home’s value, the Wayne County treasurer can write down the bill to 25 percent, Duggan said.

“Nobody’s paying $17,000 in back taxes on a house that’s worth $40,000,” Duggan said. “We’re not collecting that money.”

Duggan said he’s “most concerned about” 20,000 Detroit homeowners facing foreclosure among a new batch of 62,000 houses that could be put on the auction block next year.

“We’ve got people who are buying houses at auctions for $500, they’re renting them out, they’re pocketing the rent, they aren’t paying their taxes — we aren’t looking at cutting them any breaks,” Duggan told senators. “But those who own the homes are the focus.”

Duggan said part of the delinquent tax problem is being fueled by low-income homeowners getting two large tax bills annually.

“We think human nature being as such that when we start collecting monthly, we’ll head this off,” Duggan said.

But, even with a reduction in fines, not all homeowners will be able to make monthly payments, Duggan said.

David Szymanski, chief deputy treasurer of Wayne County, estimated the legislation could help 11,000 Detroit families facing foreclosure get on payment plans and stay in their homes: “Families that otherwise would become homeless on an already overtaxed system,” Szymanski said.

The county treasurer’s office served foreclosure notices on a record 75,000 homes this fall because of unpaid taxes. Last year, the treasurer’s office started foreclosure proceedings on 56,000 houses for unpaid taxes, but only took 26,000 of the homes to auction, Szymanski said.

“Basically this is a method of clearing out bad debt, debt that would otherwise be written off, so why not keep the people in their homes,” Szymanski said.

Rep. Phil Cavanagh, D-Redford Township, is sponsoring the main bill, which would sunset in June 30, 2016. If homeowners default on their repayments, the 18 percent interest charge is restored, Duggan said.

“If you fall behind and don’t accomplish that, then all fees, all fines are attached and the property continues to go to foreclosure,” Cavanagh said.

Over in the House, Walsh has another bill that would prohibit housing speculators with delinquent tax bills from buying more tax-foreclosed property in the city to which they owe back taxes.

Syzmanski said he has concerns about the bill because it would require the treasurer’s office to screen hundreds of potential buyers for overdue tax bills and blight violations in 43 different communities in Wayne County.

He also said the bill would prohibit an individual from bidding on the home they lost in foreclosure over delinquent taxes.

A special House committee set up to handle Detroit’s bankruptcy issues will hold a hearing Thursday morning on Walsh’s delinquent tax bidders legislation.

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