Gray Halts Tax-Lien Sales in Response to Uproar

Posted September 13, 2013 at 7:12pm

Mayor Vincent Gray ordered the cancellation of 2013 tax-lien sales on owner-occupied D.C. properties not already in foreclosure proceedings Friday evening in response to the scandal over a D.C. Office of Tax and Revenue program that has landed residents in foreclosure over small tax debts.

The decision marks Gray’s first action since a Sept. 8 story in The Washington Post, the first in a recent series documenting how the office imposed liens on delinquent tax bills and sold the liens to investors under a program that provides a financial incentive to outsourcing debt collection over keeping people in their homes.

“Last Sunday, when I first learned from a Washington Post article about the problem of vulnerable District homeowners losing their homes through tax-lien sales, I was appalled by the injustices cited and immediately began pursuing potential remedies,” Gray said in a his office’s first published statement on the matter.

The practice has allowed investors to foreclose on nearly 200 houses since 2005, according to the investigation, and lien holders are in the process of seeking control of 1,200 more.

When asked about the tax-lein sales at media appearances throughout the week, Gray repeatedly told reporters that he was in communication with other departments within the District government and was working to find a solution.

The cancellation order means that the District will step in and redeem the properties from the tax-sale purchasers. According to a press release, approximately 142 owner-occupied properties from the recent July 2013 tax sale will be affected. The risk of immediate foreclosure will be lifted, but homeowners will still be required to pay the taxes and interest owed on the property.

Gray is also seeking candidates for the newly-create office of Real Property Tax Ombudsman, a position created to provide counsel to residents needing assistance and directing them to appropriate resources, according to the release.

Gray announced the Office of the Attorney General and the Office of the Deputy Mayor for Health and Human Services will examine all of the pending foreclosure proceedings stemming from prior years’ tax-lien sales involving the primary residences of taxpayers to determine if any of those sales should be canceled prior to the final order of foreclosure.

As a more permanent fix, Gray plans to introduce legislation to the D.C. Council on Monday.

Among the provisions listed in his release are: “expanding required notice to homeowners of their rights and alerting them to resources that are available to assist them; setting a cap of $2,200 on the legal fees that tax sale purchasers may collect; increasing the minimum threshold for tax sale to a debt of $2,500 for properties receiving the Homestead Deduction; sending copies of the notices to property owners to alert them to the tax delinquency and the pending tax sale to the Real Property Tax Ombudsman, who will be able to reach out to homeowners and provide assistance as needed; and giving OTR the authority to negotiate and enter into deferred-payment plans with homeowners on real-estate taxes in order to accommodate owners with limited means.”

The Washington Post also reported that Gray and council members were warned about the predatory practice 16 months ago in a letter from a coalition of community advocates and law firms.

Gray told reporters his office had never seen the letter, due to a mail-sorting mistake.