Updated Jan. 4 at 8:57 p.m.
Homeowners in more than 30 cities and towns in Massachusetts collectively lost an estimated $97 million in equity through foreclosures over a six-year period, according to a new study by the libertarian Pacific Legal Foundation.
The losses are partly the result of an unusual policy that allows property owners to lose everything, including any equity remaining in their home, in tax lien foreclosures in Massachusetts Land Court. Massachusetts is one of just 12 states that allow this type of foreclosure system.
The California-based legal organization calls the policy unconstitutional, citing a clause in the United States Constitution that prohibits the government from taking private property for public use without just compensation. The group's report mirrors criticism leveled by local housing advocates and some legislators, who have tried for years to reform the state’s laws.
“Government should protect private property, not enable state-authorized theft,” the report from Pacific Legal Foundation stated. “When governments (or their agents) take property, sell it, and keep all the proceeds — beyond what is owed on a debt tied to that property — they steal money from some of the Commonwealth’s most vulnerable residents.”
Several state legislators have proposed bills aimed at retooling laws around tax liens, including better notice to property owners of their debt and explicit language about how the process can lead to equity being taken both by municipal tax collectors and by private companies that buy up the debts and then pursue foreclosure against homeowners.
Forcelosures are not only the result of failure to pay a mortgage. Property owners can also be forced into default because of unpaid real estate taxes or even water or sewer bills.
The Massachusetts Collectors and Treasurers Association has consistently resisted reform bills, arguing that they would be costly and complex for municipalities to implement.
Christopher Sweet, treasurer and collector for the town of North Attleboro and the president of the state association, told GBH News that he’s open talking about changes to the state law but he said the Pacific Legal Foundation exaggerated the magnitude of the problem.
“It sounds dramatic and it is terrible — people losing their homes and being foreclosed on — but it's not as widespread a problem as they portray in the report,” said Sweet. He said just a small fraction of the millions of homeowners in the state have lost property through tax lien foreclosures over six years.
But local critics and the foundation have argued vulnerable homeowners are most likely to lose in such cases.
“It affects almost exclusively low-income people and elders who are house rich and cash poor,” said Todd Kaplan, a consumer and housing attorney at Greater Boston Legal Services. “When we see the numbers of people who actually lost their homes, those are people that are vulnerable ... and that's why they lost their homes.”
Pacific Legal Foundation is based in Sacramento, Calif., but has challenged similar laws in other states. The organization’s report on Massachusetts focused primarily on 31 cities and towns that used tax liens to pursue foreclosures through the Massachusetts Land court between 2014 and 2020.
According to the report, these cities and towns foreclosed on and then sold 254 properties, causing property owners to lose estimated $60 million in equity beyond what property owners had owed in back taxes or unpaid water and sewer bills.
One particular private investment firm, Tallage LLC, successfully foreclosed on and then resold 154 properties in Massachusetts dating back to 2014, according to the report. The company buys tax lien debts from cities and towns, taking over the role of debt collector. It currently has 68 foreclosure cases pending in Land Court, according to state court records.
The report said that owners of the properties Tallage foreclosed on collectively lost $37 million in equity based on full market value of properties that were resold.
Dan Hill, Tallage’s attorney, disputed the report’s findings, saying its calculations about lost equity were inaccurate and that many of the firm’s foreclosures involved land not homes.
“Tallage has always operated within the confines of the law,” Hill wrote in an email to GBH News. “Every foreclosure case is administered by the Land Court and reviewed by a judge before decree of foreclosure is entered, to make sure everyone who had a right to redeem the property had full and fair notice and opportunity.”
This story has been updated to include specific information about the Boston private investment firm Tallage and its response to GBH News' inquiry.
