By Andrew Leonard
Nearly a dozen major banks and hedge funds, anticipating quick profits from homeowners who fall behind on property taxes, are quietly plowing hundreds of millions of dollars into businesses that collect the debts, tack on escalating fees and threaten to foreclose on the homes of those who fail to pay.
Here's how it works. A homeowner fails to pay property taxes on time, and gets a tax lien slapped on them by the county tax collector. But local government doesn't have the resources or manpower to effectively enforce the proliferation of tax debts in the current distressed economic environment. So it bunches them up together and sells them off to the highest bidder at online auctions.
The winner of the auction then proceeds to do its best imitation of a loan shark, slapping on additional fines, charging high interest rates on the debt, and eventually initiating foreclosure proceedings.
Years ago, the big banks left the buying of owed taxes largely to local real estate specialists and small-time investors.
These days, banks and hedge funds, stung by the failure of many speculative investments, see the loan-shark business as a relatively safe option that can yield returns of around 7 percent.
It's so typical of the decayed state of capitalism. The banks that aided and abetted a frenzy of dubious mortgage loans then proceeded to get badly burned by their investments in mortgage-backed securities when it became clear that underlying mortgages were crap.
The ensuing economic crash pushed millions of Americans over the financial edge. And now the banks have discovered that there's a safe, steady business model in cashing in on their hardship.
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