Loophole weakens law barring foreclosure buybacks
For Jeffrey Cusimano and his rentals, the county’s foreclosure auction has meant never having to say goodbye — even when he or his companies didn’t pay a rental’s property tax bills for years.
In 2015, Michigan banned owners from repurchasing their foreclosed properties for as little as $500 at the tax auction, while wiping away thousands in debt.
But recent land transactions appear to show Cusimano, one of the biggest beneficiaries of the practice, has found a way around the restrictions.
Last fall, the Wayne County Treasurer foreclosed on 25 rental homes and other properties owned by Cusimano and his companies over $272,900 in unpaid taxes and fees.
But four months after they were sold to bidder Daniel May for $33,150 at the auction, May sold the properties to a newly formed company registered to the same address as Cusimano’s East Seven Mile rental office.
“It’s a joke,” said Ted Phillips, who runs a nonprofit that advocates for poor residents facing tax foreclosure. “It’s exactly what we thought would happen. The guys that have done this just find a different way. ... Everybody suffers — homeowners, the city and the county.”
Critics, including Phillips and past officials with the treasurer’s office, had warned legislators that property owners would continue buying back their tax-delinquent properties through new companies.
“As currently written, it does not prevent a person or entity from purchasing a property on behalf of someone who lost it,” Wayne County Treasurer Eric Sabree said in a written statement. “Our priority focus is to reduce foreclosures in the first place, and we are making great progress in this area.”
The law was adopted after The News reported on the buyback loophole estimated to have cost the city millions in tax revenue. In 2012, The News found owners erased at least $4.7 million in property taxes and liens on more than 400 properties they bought back at auction. Owners are supposed to lose their properties after three years of unpaid taxes.
May, whom The News couldn’t reach for comment, sold the properties to CJ Lakewood Investment LLC for the price paid at the fall auction. The company lists its address as 14919 E. Seven Mile, the location of Cusimano’s rental office.
“You can’t do that anymore,” Cusimano said in March when asked by The News if he had bought back the properties. “I am managing the properties for him.”
Cusimano was in 36th District Court that day, where he had just appeared for an eviction case he filed on one of the properties bought by May.
Another of the 25 properties — 14780 Maddelein — has been repurchased three times by Cusimano-related companies over the last decade.
“He shouldn’t be vilified for working the system the way it existed at the time,” Cusimano attorney Paul Louisell said. “He knows the system can’t be worked that way anymore.”
Cusimano has benefited from the practice. The News found he erased about $600,000 in taxes and other liens in 2011 by buying back 34 of his foreclosed properties at auction.
Cusimano even bought back his East Seven Mile rental office for $7,600 in 2011, after losing it the previous year over $23,300 in back taxes and fees.
“I don’t think it’s OK; it’s just how things are,” Cusimano told The News in 2011. At the time, he argued Detroit taxes were so unfairly high it was a good business decision.
A citywide reassessment forced by the state since then has, in some cases, dramatically lowered the value of homes and their tax bills.
County officials have said they do vet auction buyers. The law requires bidders sign an affidavit declaring they don’t owe taxes or blight fines and face perjury charges for lying. In 2015, the office began requiring auction buyers pay the summer taxes on the properties they buy.
While CJ Lakewood was buying the foreclosed homes from May, Cusimano donated a dozen dilapidated and vacant properties to the Detroit Land Bank, while owing more than $62,000 in back taxes. Some sites required demolition.
“In certain circumstances, properties can be put back to productive use more quickly by the DLBA than through the typical foreclosure process,” Craig Fahle, the land bank spokesman, said in an email.
Phillips, executive director of the United Community Housing Coalition, said the law barring buybacks has only limited homeowners from using it to eliminate crushing tax debt. Some have been over-assessed by the city, or are so poor they probably didn’t have to pay the taxes. Many don’t know they qualified for a city poverty exemption, he added.
In 2014, Phillips’ group helped 300 families buy back their homes for a lower price at the auction.
Since then he’s had to turn away homeowners wanting to do the same.
“What makes it more insidious is it takes away more competition from the investors,” Phillips said of not allowing homeowners to bid on their properties. “Who has benefited is the investor.”