In D.C., small tax debts lead to misery, loss of homes

Sep 10, 2013

The District's century-old tax lien program has turned into an often predatory system of debt collection for well-financed, out-of-town investors who have turned $500 delinquencies into $5,000 debts - then foreclosed on homes when families couldn't pay, a Post investigation has found.

As the housing market soared, the investors scooped up thousands of liens in every corner of the city, then started charging homeowners legal fees and other costs that far exceeded their original tax bills, a gamechanger that has made it more difficult for families to save their homes. Tax lien purchasers have foreclosed on nearly 200 houses since 2005 and are now pressing to take 1,200 more, many owned free and clear by families for generations.

In "Homes for the Taking," a three-part series, The Post also finds that tax lien purchasers engaged in unusual bidding at the District's tax auctions - similar to bidding patterns found by FBI agents investigating bid-rigging at Maryland auctions - and that city tax officials have made hundreds of mistakes by declaring property owners delinquent even after they paid their taxes.

Join the reporters, Michael Sallah, Debbie Cenziper and Steven Rich Tuesday, Sept. 10 at noon for a chat about the series.

Good afternoon everyone.

The Post received an overwhelming response this week to Homes for the Taking: Liens, Loss and Profiteers. The investigation found that the District's tax lien program has morphed into a predatory system of debt collection for well-financed, out-of-town investors that turned $500 delinquencies into $5,000 debts -- then foreclosed on homes when families couldn't pay.

One man, retired Marine sergeant Bennie Coleman, lost his $197,000 home over a $134 tax bill.

Daisy Dolsey, who is 95 and living in a nursing home, lost her $300,000 home over $44.79.

Yesterday, the mayor and members of the D.C. Council promised to propose emergency legislation. But this problem has affected homeowners for years -- nearly 500 properties have been lost to tax lien foreclosure since 2005.

We're looking forward to hearing your thoughts as we continue to pursue this ongoing investigation.

Debbie Cenziper

Mike Sallah

Steven Rich

Is there reciprocity with other states that banned Investors?

Bidders aren't necessarily banned when they are caught rigging auctions. In Maryland, for example, Berman and Nusbaum have not been banned as a result of the criminal case.

The D.C. tax office also stated that it only bans investors who owe taxes themselves.

I don't have any particular question, but I wanted to thank you for giving this issue the publicity it deserves. I'm disgusted that the administration only cared about this issue once it got negative press. I'm also grateful to know more about this so I can provide better information to my clients and their family members, as I work with the elderly for my job. Any of the individuals featured could have been clients of mine, which truly makes me ill. Shame on DC and the shady organizations participating in legal theft.

Thanks so much for writing in.

Local housing lawyers have been pushing this issue for years and had even proposed legislation late last year to the D.C. Council.

Nothing much happened until yesterday, when the mayor and some city council members promised emergency legislation.

We'll see what happens.



You stated: "Not only did he lose his $197,000 house, but he also was stripped of the equity because tax lien purchasers are entitled to everything, trumping even mortgage companies." Is this true? It makes no sense for a tax lien purchaser to get the balance after the past due taxes and expenses of collection.

Yes, it's true.

In the District, tax lien investors are in first position and take everything, including the equity. Most of the homeowners we interviewed owned their homes outright -- years and years of equity lost.




The Distrcit should consider what the State of Rhode Island did to protect families and elders- The Madeline Walker Act. It provided for the State's Housing Finance Agency- Rhode Island Housing- to advance funds on behalf of the owner. A payment plan and counseling is then provided for these owner-occupied cases. This would be a more responsible and protective action than the current practice, which only encourgages bottom-feeders to desperate homeowners.

Interesting suggestion.

We mentioned Rhode Island's program in our story -- one of the many ways cities and states have tried to protect vulnerable homeowners from foreclosure.

Do counties that don't use tax liens suffer economic hardship by comparison with counties that do?

That's a great question.

We interviewed homeowners, housing lawyers, advocates -- everyone agrees that collecting delinquent taxes is crucial.

Other places, however, collect the money inhouse instead of privatizing. That way, local governments can control the process and offer protections for vulnerable homeowners, like payment plans and foreclosure counseling.

Now that these mistakes have come to light, can those who lost their homes get them back? Or at least be compensated? Can the predators be prosecuted?

We're hearing from people across the region who are asking the same questions. We'll see what happens.

I'm only a week away from foreclosure on a tax lien in Warwick, RI - and can't even find a lawyer, realtor... anyone... to help. Even the State housing authority, who is supposed to intervene in such cases, has denied me help because they did not catch this prior to the original tax sale date. I've been out of work with medical and mental health issues... just barely finished chemotherapy - still waiting for the possibility of any disability help - and live these last days in a home that was owned outright, fearing homelessness. It's detestable that this can happen, especially given the economic conditions of recent years.

I would consider contacting a local news organization, possibly the Providence Journal or a local television station. Simply explain your predicament. Rhode Island created a fairly responsive system to help people, partly because of a story that was published a couple of years ago about a woman who lost her home to a tax lien purchaser right before Christmas. The legislature responded.

More than anything, I am curious about how much the Mayor and the City Council members know about this program, yet did not act to end the abuses within it. Is there a timeline of who knew what and when? I believe that an elder law group was among the first to write to the Mayor and Jack Evans, but what about others? And what is their excuse for not acting? Thank you (and nice job on the series, and I'm not one to compliment the Post very often).

First, thanks for the compliment.

I sat in a Council hearing last October when Legal Counsel for the Elderly talked about these types of predatory practices. That's what got us started on this story.

We're asking some of the same questions you are, so please keep reading. We have more stories on the way.

How did you organize and analyze all the data you must have collected for this story?

That was mostly my job. The data was collected for the story through numerous FOIA requests and through creating programs to scrape government websites for the data we needed.

Analyzing the data was done using database programs and Structured Query Language, often cross-referencing datasets to find more information than we could get from just one. To analyze the bidding patterns, however, we ran statistical analysis in both SPSS and R.

I hope this answer isn't too wonky.

Where are the people today, that lost their homes? Have they or their estates filed claims against the city? Berman? How do the elected officials not know this was going on? Jack Evans is the long time chair of the finance/revenue committee. Are the "lien" buyers tied to the local pols (i.e. campaign donations, etc). What "inside" folks at OTR had relationships with the bidders? Good work on this story!!

Bennie Coleman, the retired Marine sergeant, is in assisted living after losing his home of 20-some years.

Daisy Dolsey is in a nursing home in the District. Hattie Dorsett, who lost her home while she was in a nursing home in South Carolina, died before her family ever told her about the foreclosure.

Steven Berman is still bidding at the District's auctions. He sat in the front row at the auction this past July and became one of the top bidders...

what has happened to him? does he have a place to live or is he on the street? has the va been queried about placing him in care? there is a soldiers and sailors home in dc, have they been asked about room for this nco..what a sorry state of affairs.

Bennie is now living in an assisted living facility about a mile from his former home. He doesn't go out very much because of crime in the neighborhood, but he's treated well by the staff. He can only stay temporarily because he can't afford the monthly rent, so his guardian (appointed by the court after a local pastor interceded for him) is now looking to place him in a nursing home. We do not know if the VA has tried to help, but we just heard the Marines are interested in doing something for him. We are keeping an eye on him. 

Are any of these commercial or vacant properties?

Of the nearly 200 homes foreclosed on, no. They're all residences.

There were 300 more properties (vacant, commercial, investment and others) that have also been foreclosed on since 2005.

I won't be able to make the live chat, but I want to say thank you for such an in depth story about something that very few people would take notice too. Having moved out of the DC area I'm shocked to find that the rest of the country doesn't recognize the Post for the top notch newspaper that it is. These types of articles (and the editorial decision to allow three researchers to cover this story for such a long time) is what the paper needs to get back to the standing it once had.

Thank you. The Post will never lose its investigative edge. It's very much a part of the newspaper's tradition. As far as this kind of project, it was important to give real victims a voice.

What do you forsee in the immediate future for the various District offices involved? Based on on the plethora of mistakes made by the city regarding these fraudulent tax sale would an audit seem most likely? Perhaps forensice accounting and investigating the companies that seem to be repeatidly involved in these tax sales. I am a DC home owner and this frightens me.

The tax office has been warned for years by its own auditors about sloppy record-keeping, bad addresses and other accounting problems.

There have been a series of audits since 2007, when manager Harriette Walters was caught stealing millions from the agency.

But some of the same problems seem to keep surfacing.

One in every five liens have been sold by mistake -- often because the tax office can't quickly update its records when a property owners pays.

We'll keep you posted on any follow-up investigations.



Thank you! This has been going on FOR YEARS! Will there be new hires to file through each bid/bidder and cross reference with title companies/attorneys to be certain people are not being taken advantage of again?

Hopefully, some of the proposed reforms will help (if passed). But real improvement and oversight has to start with the elected representatives who pass the laws and  the agency leaders they hire to run this very obscure but important program. 

Of course what is lost in this discussion is the fact that the great majority of DC residents pay their property taxes in full and on time. Certainly there are those who need special protections and assistance, including our valued seniors who want to age in place. But it is astounding how many taxpayers come to court claiming they didn't pay their property taxes because nobody sent them a bill... for years at a time. I don't need to be told if I own real property I need to pay taxes on it. How to separate the scofflaws from the legitimately disenfranchised?

This is an important point -- thanks for bringing it up.

The victims in our stories -- Bennie Coleman, Daisy Dolsey, Hattie Dorsett and others -- had paid their taxes year after year, just like a majority of D.C. property owners.

But something went wrong -- and there were no safety net in place before their houses were lost to foreclosure.

That's why other places have introduced protections for particularly vulnerable homeowners. New York City, for example, doesn't sell liens on houses owned low-income seniors, the disabled, veterans and others.

Maryland caps the fees charged by investors, which likely would have helped all three of the victims mentioned above.

The District doesn't offer those types of protections.

Are there any pro bono or low cost legal resources (in D.C.) out there for people who might find themselves or their loved one in a similar situation?

There is a group of probono lawyers who have been working on this issue for a long time. They've set up shop at tax lien court on Wednesdays to help homeowners.

Start with AARP's Legal Counsel for the Elderly.

In Part 3, the Post detailed the known errors that have occurred in the tax sale system, but they really only scratched the surface. My mother's property was sold in a tax sale in 2011 because of a DCRA assessment for construction debris (from a home renovation). Upon reviewing all of the facts in our attempt to fight back, we found that the city had more than quadrupled the property tax due on the home in 2011 and that the DCRA assessment fine had been placed against the property twice (thereby inflating the debt owed). The tax lien had been placed on the auction block on two separate occassions because of these errors. The DC property tax office are very reluctant to reverse/invalidate tax sales without a mountain of proof of their wrongdoing. This again increases the likelihood of property loss. The 34% error rate quoted in the article only affects the sales that occurred but were later reversed, the real error rate is likely very higher. Many elderly homeowners don't know how to respond and/or fight back, so although errors may have existed in regards to their property, if they don't know how to fight or can't afford attorneys, their homes were sold and they were evicted because of the predatory nature of this system and this city.

I'm sorry to hear about your mother's property.

We're getting dozens of calls and emails about tax office mistakes, and yes, some were never corrected. You make a good point.

We have more stories on the way and would love to hear from property owners in similar situations.

I have a colleague who is a real estate investor and the DC government had determined that a house (occupied) with renters was vacant & that triggered the higher property taxes. Because he believed he had paid all of the property taxes, the lien was unknowingly sold at a sale. He went round and round with the DC government, and ultimately lost the $400k+ property to a tax lien investor. Did any of your research uncover other coupling of bad DC government policies and administration that resulted in unjustified loss of real property by owners? Any recourse that you would suggest for my friend? He could be available to provide additional documentation and timeline of all of his efforts -- but my point is that this is related to the corruption and bad administration of the tax office.

Without knowing all the details of your colleague's case, it sounds like part of the problem may have been proper notification -- one of the key breakdowns that DC housing advocates angst over. We can't tell you how many people have complained they didn't know a lien was even sold on their property until they got a court summons that a tax lien purchaser was moving to take the house. There is also a serious lack of communication between the local agency that places vacancy designations on properties and the tax office. It's a very Byzantine system that confounds homeowners and quite frankly, even real estate experts. 

There was an article on curbed this morning where the CFO stated that "most of the truly egregious offenses brought up in the Washington Post story happened over six years ago." Care to comment?

Thanks for the question.

There are 1,200 homes currently threatened with foreclosure by tax lien investors.

Two-thirds of the property owners who had liens sold by the District just last year are now in court, fighting for their homes.

This year alone, there were nine tax lien foreclosures for liens of less than $1,000.

I'm not sure how we would explain that point to Bennie Coleman, who lost his home in 2011 and is now living in the basement of an assisted living facility.


Could these properties have been sold to protect the equity?

Under DC law, all equity goes to the tax lien purchaser. 

The article mentions some fee amounts but doesn't discuss what those are comprised of, only that one lien holder's fees were called unreasonable. In order to have some reference as to what the abuse is, what is the reasonable amount of fees after it gets to the point of having to go to court?

The fees comprise of everything a lawyer has to do to file and follow-up on a case. It can be writing up court filings, sending notices or even billing for the bills, themselves.

Aeon, the company mentioned in the article, charged flat fees to homeowners for attorney fees of $4,500, often within a week of filing in court.

A D.C, judge called the work "boilerplate" as court filings from a single investor tend to just change a few pieces of information from case to case.

I do not have a question . I to want to thank you for your reporting; this is what newspapers should be doing more of. I was a homeowner in the District I lost my home due to job loss and the inablitity to pay arrears or get a modification. The arrears was less than 4k but the lawyers fess were double the arrears making my total due more than 10k. My things were put out in the street and the house sold and occupied in less than one month. The home was located in far NE Deanwood. I was also a victim of the incompetent DC Tax office I was billed for my neighbors property I payed it with out noticing that the address and lot were off by one number. When I received MY taxes bill was when I realized the error. I could not get a refund from DC. Afer a year of phone calls and letters and not one response from a human; I went to my council person's office of constituient services with an envelope an inch thick with my documents and proof of correspondence. I was finally able to get a response by phone and was told that my deed had been recorded wrong by the settlement company. For the next two years I received a bill that said 0.00 taxes were due. I never found out what happened with my neighbors tax bill. I also contacted the settlement company in Sivler Spring ; about the mess- they never responded. The real estate and banking industry operate on the level of gangster ponzi schemes.


We're very interested in Deanwood, which was hit the hardest by tax lien foreclosures in recent years.

Thanks for sharing your story.

what can be done to distinguish between fair and unfair practices. the elderly get targeted its heart breaking but then there are those who legitmaly just decide not to pay taxes because of a bad investment. how with OTR distinguish?

Sometimes just the amount of a lien can be telling. A tax debt of less than $1,500 on a house owned by a senior citizen can be a red flag. The same with someone who is disabled. Unlike DC, other jurisdictions across the nation recognized these gaps years ago and created consumer protections. Low-income seniors and others still have to pay their taxes, but the tax lien purchasers can't take their homes.

Thanks so much for your feedback and questions today. We enjoyed it. Please keep reading and email us with tips:

In This Chat
Debbie Cenziper
Debbie Cenziper joined The Washington Post's investigative team after working at the Miami Herald. She won the 2007 Pulitzer Prize for stories on public housing corruption in Miami and was a Pulitzer finalist the year before for stories on breakdowns in the nation's hurricane-warning system. At The Post, she has reported on local AIDS groups, dangerous conditions in rent-controlled housing and the federal government's troubled housing-construction program for the poor.
Michael Sallah
Michael Sallah joined The Washington Post's investigative team in 2012 after working at The Miami Herald for seven years. He won the Pulitzer Prize in 2004 for uncovering hidden war crimes in Vietnam and a subsequent cover-up by the Pentagon. He was named a Pulitzer finalist last year for stories on the wretched and deadly conditions in Florida's assisted living facilities, which led to the shutdown of some of the state's largest homes.
Steven Rich
Steven Rich is the database editor for The Washington Post's investigative team. He's worked on investigations about drug cartels and deficiency judgments that have hounded struggling homeowners long after they lost their homes. He recently wrote about the massive backlog of claims at the Veteran's Administration. A native of the Philadelphia area, he earned a Master's Degree in Journalism from the University of Missouri in 2013.
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