Real-estate investors and lenders who take advantage of tax lien sales to acquire houses in Providence face a new obstacle: a collaboration between the city and the Rhode Island Housing & Mortgage Finance Corp. to give homeowners another way out of their bind.
Saving properties from tax sale has not traditionally been part of Rhode Island Housing’s mission, but a new law passed this summer by the General Assembly changed that, authorizing the agency to buy liens directly and encouraging it to help homeowners.
As originally envisioned, the law would’ve gone farther, allowing the city to sell liens in bulk to a nonprofit corporation run by Rhode Island Housing. Even without that, however, officials expect it to keep protect scores of homeowners from speculators and predatory lenders.
“The home is usually the single greatest asset we own in the course of our lives,” Mayor David N. Cicilline said in a news release. “It is central to the order of our lives and to our family, and it is crucial to the stability of our neighborhood. When someone loses his or her home, it has a profound impact – and we are trying to keep that from happening.”
The program is getting its first test already. Providence has scheduled a tax sale for Sept. 9, and in preparation, on Wednesday, Rhode Island Housing sent out letters to 228 homeowners.
“We understand you are having trouble paying your real estate taxes,” the letters begin. “The City of Providence has asked us to work with you. As the state’s housing finance agency, we help people like you every day, but time is short.”
The letters explain the basic tax lien sale process: Investors can buy title to your property by paying the taxes and interest due, and then you have a year to pay them back, or else they can seek to take over the property. They also warn: “Because this tax sale has been advertised in the newspaper, you may get all sorts of offers of financial help. Please be cautious. Call us before you agree to anything. We want to help you avoid losing your home.”
Michael V. Milito, deputy assistant director for law at Rhode Island Housing, said the agency plans to develop special loan programs for people with tax liens, but for this first round, it’s steering homeowners to existing programs – such as reverse mortgages for the elderly – and offering them in-depth financial counseling.
“It’s almost a triage, with the goal of helping as many people as possible to come up with a solution so their property doesn’t get sold,” Milito said. It’s less costly to pay the taxes before the sale, since interest and fees accrue once an investor has bought the lien, but Milito said help will also be offered to those who can’t avoid a sale.
Milito said he doesn’t expect Rhode Island Housing to actually buy any liens this time, but he wouldn’t dismiss the option entirely, saying, “Anything is on the table.”
The agency will use what it learns from this tax lien sale to develop additional programs and strategies to help homeowners, Milito said – not just for Providence, but potentially for people all across Rhode Island. The agency’s programs are only available to low- and moderate-income residents, but the definition is fairly generous: for the reverse mortgages for the elderly, for example, the cap is $84,100 in annual household income.
Cicilline and leaders of the Urban League of Rhode Island, which developed the concept for the new program with city officials, are now working to raise awareness of it.
“This program is about protecting families, protecting homeownership and protecting our neighborhoods, and I urge all residents who may be affected by this tax sale and receive this letter from Rhode Island Housing, to follow up on it,” Cicilline said.
“I am glad the city, Rhode Island Housing and our state legislative leadership have taken this issue seriously,” said Dennis Langley, executive director of the Urban League. “Too much exploitation has happened over the last 15 to 20 years at the expense of the poor.”
