County makes tax delinquents pay even more! Post 60

County to sell off taxes due

THE ENQUIRER 12/03/07    Cincinnati, Ohio   By Jessica Brown

Property owners would pay tax, interest to debt collectors

Behind on your property taxes? Get ready for calls from a collection agency.

Hamilton County property owners owe more than $60 million in delinquent taxes.

Starting next year, for the first time, some of those people will get a letter in the mail saying that if they don’t pay, their account will be turned over to a collection agency.

The hope is that the letters prompt many of the recipients to pay, said county Treasurer Robert A. Goering. His office is working out the details but expects to have the program started in early 2008.

That money is sorely needed by school districts and other programs that rely on tax levy dollars. Some organizations like Cincinnati Public Schools were hard-hit by failed tax levies Nov. 6. This could be a windfall for them.

So the county plans to begin selling delinquent tax liens to collection agencies. The county will get the full amount of its money more quickly, but the property owners will have to pay more in fees and interest.

People who are on a payment plan because of financial hardship or those who have contested their assessment would not be included.

Goering estimates about 20 percent of those who owe money would be subject to having their accounts sold.

Cuyahoga County Treasurer Jim Rokakis was among those who pushed for the law. His county at the time had $200 million in uncollected taxes – the largest amount in the state, he said.

The program is working. His office went from collecting between $25 million and $30 million a year to collecting $80 million to $100 million.

“You receive a note in the springtime that we’re going to sell your tax lien,”Rokakis said. “They come streaming in the door. They either get on a payment plan or pay the full amount.”

His office does not sell liens of properties worth less than $50,000 or owned by anyone who is on a payment plan, is filing for bankruptcy or is a senior on a fixed income.

Cuyahoga County puts its liens out for bid; the company offering the lowest interest to property owners wins. The maximum interest rate a company can charge is 18 percent, according to Robin Thomas, the county’s chief deputy treasurer.

Goering said he understands times are tough for property owners. That’s why he’s exempting those who have made arrangements for a payment plan.

“The real estate market has been kind of in the tank,” he said. “It’s not surprising people are struggling.”

But the county is also in a financially difficult position and needs every penny it can get, he said.

“It’s something I wish could have happened sooner. I’m glad he’s now willing to move forward on it,”Portune said. “His willingness couldn’t be happening at a better time given the budget issues that we are facing and the issue school districts are facing.”

Hamilton County is facing a $35 million deficit in its 2008 budget and is proposing deep cuts including layoffs and elimination of important programs.

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Credit reports now being dinged

In another example of how government tax collectors undermine citizens, the delinquent tax lien is being sold to a collection agency. The collection agency will report to the credit bureaus that the debtor is in collection. This will negatively affect the debtor’s credit rating in a significant way.

Higher interest rates

If the debtor were able to get a loan to pay the taxes, because the lien is in collection, the interest rate will be much higher and may require collateral. Household Finance Company or Beneficial Finance or American General Finance or any other finance company will often make small loans. The interest rates vary according to the credit rating of the borrower. A collection account would increase the interest rate significantly.

Credit ratings will be hurt badly

The debtor’s FICO score, i.e. their credit rating score, will go down by about 30 points or more as a result of the collection account.

If their previous FICO was 725, it will go down to 695; below 700, which is a symbolic dividing line moving a borrower from a solid low A credit rating to a B credit rating.

If the debtor’s previous FICO was 625, it will go down to 595; below 600, which is a symbolic dividing line moving a borrower from a low B credit rating to a C/D credit rating.

The result is higher payments

Especially in today’s tight credit market, where lending programs are very sensitive to the credit rating; the collection account will cause the interest rate to go up several percentage points and the amount a tax delinquent may be able to borrow will go down several percentage points.

For Example

A $7000 finance company loan for a 725 FICO borrower will get a interest rate at about 12%, paying $155.71 per month, and with a 695 FICO, the interest rate might well be 15%, necessitating a payment  of $166.53. This is $10.82 per month more for a 60 payment loan, for a total increase of $649.20.

Further, a $7000 finance company loan for a 625 FICO borrower will get an interest rate at about 18%, paying $177.75 per month, and with a 595 FICO, the interest rate might well be 24%, necessitating a payment of $201.38. This is $23.63 per month more for 60 payments, for a total increase of $1417.56.

Additionally, for seven years, all future borrowings the tax delinquent makes will be negatively affected. Credit cards will have a much higher start rate and lower lines of credit. Mortgages will now require a down payment or the down payment needed will be increased.

There’s more bad news for the tax delinquent

Moreover, where previously a small loan would not need to be collateralized, now, with a reduced FICO, the loan might require collateral and therefore the loan amount might have to be raised to the minimum amount needed for a mortgage, usually $25-60K, necessitating high closing costs and causing further consternation for the debtor.

Oh yes, the borrowers car insurance will go up, let’s say $100 per year for five years, totaling $500. That is because insurance companies now check your credit rating prior to issuing you a quote.

Start adding up all the costs of being late paying your tax bills and you will quickly see that…

The punishment is greater than the crime.

I know that the government needs money to pay its bills. However, government has other avenues open to it other than burying property owners under bad credit. The government can borrow the monies and issue bonds or it can charge higher interest or add a fee to the property owner.  Here’s a novel idea:  the county can telephone each delinquent taxpayer themselves, requesting that they set up a payment plan.

I have asked many counties why the county does not call debtors and invariably they say that it is “too much work” or they “are not set up” to do it. They also say something like, “the taxpayer should pay on time” and “we give them plenty of notice.” This is really reflective of their “Let the public be damned.” attitude.

A targeted list

Coach Mitch’s “Ridiculously Simple System…” shows how to make use of this situation. The tax delinquents who are in collection are now more susceptible than ever to a quick sale at a low price. In these four Ohio counties, there is over 2 Billion dollars in delinquent taxes that is owed on over 50,000 properties. Don’t you think that there is good chance that you will find a few owners that will want to get out and sell at a low price?

Coach Mitch’s “Ridiculously Simple System…” shows how to find these motivated sellers, the system shows how to negotiate with the tax delinquent and provides the documents to control the transaction.

Motivation is the key. Coach Mitch’s “Ridiculously Simple System…” shows how to key in on only the most motivated of all the motivated sellers.

See Coach Mitch’s “Ridiculously Simple System…” ™ for details.

See you at the top,

Mitchell Goldstein - Coach Mitch
518-439-6100 until midnight EST

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