October 29, 2018
What a Recent Michigan Home Foreclosure Case May Mean for You
In July, a two-year-old case in Michigan, Morningside Community Organization, et al, v. Eric Sabree, et al, went into settlement, resolving numerous issues with a particularly thorny foreclosure problem. The plaintiffs in the suit alleged that the City of Detroit and Wayne County had been assessing taxes based on property values that were a great deal higher than the properties were worth on the date of assessment.
Many of the homeowners—tens of thousands of them—were at or near the federal poverty line, and Michigan’s Constitution required that they be granted tax relief on that basis. The relatively large tax bills they received were outside their ability to pay, in violation of this provision, and were considered unfair because they did not reflect the actual value of the homes in which they lived. Because they could not pay these large tax bills, the homeowners were considered in default of tax payments, and foreclosure proceedings were initiated against them. Many vacated their homes, adding to an already troubling “zombie” home problem in the area.
This situation created a number of issues for not only the homeowners, but also for Wayne County, for Detroit, and for the lenders.
It’s never a good thing for a community when homes go vacant. Whatever the reason for the determination of tax value of the homes, Detroit and Wayne County could not possibly come out ahead in a mass-foreclosure scenario. Empty homes depress a declining housing market even further. Houses start selling for less and the value of lived-in homes falls as the level of dilapidation of a neighborhood snowballs. The best home is a lived-in and cared-for home; the best neighborhood is a lived-in and cared-for neighborhood.
The resolution of this case via settlement created a win-win situation for the homeowners and the City and County alike. The distressed homeowners were permitted to avoid foreclosure with a $1000 payment; if they were unable to make this payment in a lump sum, they were permitted to work with an organization to formulate a zero-interest payment plan. Moreover, the settlement eased the process of applying for the poverty tax exemption program that was alleged to have previously been too complex for many to understand.
While this case has no direct bearing on our clients in Rhode Island, Massachusetts, or Florida, there may be residual effects as courts throughout the nation look to this serious crisis point and its fairly elegant solution in solving the feedback loop initiated by artificially-inflated tax foreclosures, which create vast swaths of defect in title affecting entire communities—not to mention that it may display to municipalities what dangers lurk in assessing properties according to inflated values.
At Topouzis & Associates, P.C., not only do we offer the services that ensure your title gets conveyed clear of defects, we supply purchasers with Owner’s Policies of title insurance. Contact us if you want your property transfer in Cranston, Rhode Island; Springfield, Massachusetts; or Miami, Florida to go through without a hitch—both before and after closing.