Tax officials in the District of Columbia punish homeowners who are delinquent on their property taxes by placing a lien against the houses and selling them at auction. The investors who purchase the liens charge steep fees in addition to the owed taxes and have the right to seize the real estate if the money is not paid. While this has been the case for more than a century, a Washington Post investigation reveals that this process, rife with errors, has evolved into an often predatory debt collection scheme for deep-pocketed, out-of-town investors.
Under this set-up, $500 tax delinquencies snowball into $5,000 debts that cost owners their homes. Property owners mistakenly labeled as delinquent even after they paid have been forced into drawn-out court battles in an effort to save their homes. Errors ranging from crediting the wrong homeowner to telling homeowners inaccurate payoff amounts led to nearly 1,900 homes being put up for a lien sale in error over the past six years -- one out of every five. Forced to cancel the wrongful sales, the D.C. Office of Tax and Revenue has forked out hundreds of thousands of dollars to compensate the investors that purchased the liens. Among those are Chicago-based Aeon Financial, which was blasted by D.C.'s attorney general for allegedly exploiting families with exorbitant fees; and Steven Berman, who was sentenced in 2010 for fixing tax auctions in Maryland.