Huffpost Politics

Tax Lien Sale Overhaul Sent To Maryland Lawmakers

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By Fred Schulte, Lagan Sebert and Ben Protess

It's too late to help Vicki Valentine--the Baltimore woman who lost her family's mortgage-free home over an unpaid water bill of $362--but city officials are trying to prevent others from suffering the same fate.

The Huffington Post Investigative Fund first told Valentine's story in May as part of an ongoing examination of tax lien sales nationwide. Counties in Maryland, like many other states, sell investors the right to collect unpaid property taxes and other municipal debts of $250 or more.  The law allows lien holders to charge double-digit interest rates and in some cases thousands of dollars in fees. Homeowners must either pay or face foreclosure on their property.

Twelve of 15 Baltimore council members now are backing a resolution that asks state legislators to restrict the sale of liens for debts of less than $750 -- triple what's now allowed under state law. Evicting people over small debts "is simply not in Baltimore's long-term interests," the resolution says.

"It's a terrible thing to lose your home over a water bill -- particularly a small water bill. This has been a problem with the tax sale," Councilwoman Belinda Conaway, the measure's chief sponsor, told the Investigative Fund in an interview.

City officials said Valentine's story, published jointly with The Baltimore Sun, helped spur them to action. She was evicted in February from the west Baltimore home her family had owned for decades after a judge ordered her to pay more than $3,600 in legal fees and other costs--nearly ten times her original debt. Valentine, an unemployed former mental health counselor with four children, admitted she failed to pay the water bill, and later some taxes on the property. But she argued the fees were excessive and she couldn't afford them.

Valentine told the Investigative Fund that the proposed change in state law would have helped her keep the family home, which she returned to about a decade ago to care for her ailing father who had Alzheimer's disease. "If it gives someone else a chance that makes me happy," Valentine said.

Since her eviction, Valentine has been staying with family. She said she had not been able to find a job or an apartment. "I still feel anxious about my situation, but it makes me feel good that my story may prevent others from going through what I have been through," she said.

The call for action in Baltimore comes about two months after the city held what is believed to be a record tax sale, selling more than 12,000 liens to investors. That's more than twice the number sold in 2006 in the midst of Baltimore's housing bubble, an increase some city officials blamed on the poor economy. About 13 percent of the liens sold in May were for unpaid bills of less than $750, records show.

Lester Davis, a spokesman for Council President Bernard C. "Jack" Young, said he believes the council "will grant serious consideration to Ms. Conaway's bill because of its potential positive impact on Baltimore families."

But a spokesman for Mayor Stephanie Rawlings-Blake said city officials are studying other options, noting that the mayor objects to a plan that would allow homeowners to escape obligations.

"The administration does not support an amnesty for property owners that failed to pay taxes and fees," spokesman Ian Brennan said.

Maryland's tax sale system has drawn controversy in recent years. The U. S. Justice Department's anti-trust division is investigating bid-rigging by some investors at as many as two dozen of the annual sales in Baltimore and other parts of the state. Three men have pleaded guilty to criminal charges in the probe, including two longtime Baltimore tax-sale investors who made more than $10 million from fees and other costs collected over a six-year period from the owners of more than 6,000 properties.

Yet tax collectors argue that nothing short of threatening foreclosure will compel some people to pay taxes and other municipal bills. Losing that leverage could aggravate budgetary problems in Baltimore and other parts of the state, they argue. That view prevailed in the Maryland General Assembly earlier this year when it failed to pass a bill limiting the sale of liens to under $750 by a single vote.

WATCH: Vicki Valentine's story