Tax Sale

Baltimore is defending its practice of selling houses that have tax liens for unpaid water bills and other municipal fees, denying accusations by a major national bank that the city is responsible for a recent increase in mortgage foreclosures. The city defended the city's tax-sale practices in federal court filings this week as part of a groundbreaking lawsuit filed by Baltimore against Wells Fargo Bank. The city alleges in U.S. District Court that the bank exploited African-American families in Baltimore by offering them higher-interest loans than they offered white buyers, stripping them of equity through refinancings and charging them excessive points and fees.

Let's be clear here: We're not talking about people who foolishly bought more house than they could afford, or took out a subprime mortgage that they didn't understand or gambled that an adjustable rate loan that started low wouldn't ever, duh, adjust upward. We're not talking about any of those self-inflicted, foreclosure-inducing stab wounds that have contributed to the current housing crisis. We're talking about someone's house possibly being seized over what started out as a $173 water bill.

More than 20,000 Baltimore property owners who have fallen behind on real estate taxes or services such as water bills must pay up by the end of the month or face possible foreclosure. City officials plan at their annual tax sale next month to auction up to $70 million in liens to private investors, who can then collect the debts - plus thousands of dollars in fees and interest - or foreclose if they can't collect. The liens are mostly for delinquent property taxes but also include municipal levies such as water and sewer billings, charges for sidewalk and alley repair, and fines for failing to clean up trash or other environmental hazards.

Fewer homes would be subject to tax sales under a compromise reached by legislators and property investors, officials said yesterday. Responding to cases in which local governments -- primarily Baltimore -- have foreclosed on homes over small debts, including unpaid water and sewer bills, legislators have coalesced around a bill that would increase the threshold for debts that can trigger a tax sale, cap attorneys fees and provide a safety net for the...

In an effort to spare some homeowners the loss of their properties in municipal tax sales, lawmakers are proposing several reform measures. State Sen. George W. Della Jr. has introduced legislation to cap legal fees at the end of the court process and to improve notification. The Baltimore Democrat says he hopes to cut expenses and save homes. Legal costs in these lawsuits have soared in recent years, making it harder for homeowners to regain the rights to their properties by paying back taxes and accumulated fees.

In 2003, the Maryland General Assembly changed the laws regarding attorney's fees charged in tax-sale foreclosure cases. The previous standard, a maximum of $400 under any circumstances, was changed to a "reasonable attorney fee" standard as long as a lawsuit has been filed. This was an attempt to compensate attorneys for their time and expertise in matters that were both tedious and technical, and whose time was worth more than the $400 cap that had been in place since 1985. Before the change, there were about 500 tax-sale lawsuits in Baltimore annually.

A Baltimore circuit judge ruled yesterday that attorneys handling tax-sale foreclosure cases in the city can charge only flat fees instead of billing by the hour, a move aimed at reducing the amount of money homeowners have to pay to keep their homes. The ruling by Evelyn Omega Cannon, the judge in charge of the Baltimore Circuit Court civil docket, capped a yearlong review that she began after realizing that many requests for fees and expense reimbursement in tax-sale cases were not documented.

A judge has called a hearing to examine whether homeowners are being charged excessive legal fees and expenses in tax-sale foreclosure cases in Baltimore, where an estimated 3,500 such cases are pending. Evelyn O. Cannon, the judge in charge of the Baltimore Circuit Court civil docket, has asked an attorney with the Public Justice Center to study the matter and suggest guidelines before the hearing Oct. 18. She also has invited responses from attorneys who handle tax-sale cases. "It's a pending case, and I don't feel it's appropriate to discuss it," Cannon said when asked about the hearing.

Records turned over to a federal grand jury investigating municipal tax-sale auctions show that two of Maryland's largest tax-sale investors didn't bid against each other for properties during the past four years in Montgomery County. Bidding lists were among documents demanded in the subpoena, which also sought any records from 2002 to 2007 that would show whether bidders communicated with one another about what properties they would bid on and prices they would pay, or about any inducement not to bid on certain properties or not bid at all. The subpoena is part of an investigation being coordinated by the Justice Department's antitrust division in Washington.