Guest Article: County Treasurers Fight Tax Foreclosure

NC Treasurer Holly Moon

By Holly Moon, Newaygo County Treasurer

Foreclosure is a tragedy. That’s why most county treasurers including myself go way beyond our legal duty to notify taxpayers about outstanding tax bills and offer solutions to prevent tax foreclosure. Treasurers throughout the state meet with tens of thousands of taxpayers each year to discuss payment alternatives, and refer families to outside agencies and nonprofits for tax and financial help. More than two dozen additional legal measures are taken over a twenty-five month period to help people avoid tax foreclosure. 

These efforts are made because it is the responsible thing to do, and it keeps families and small business owners in their properties.  By avoiding foreclosure and successfully collecting delinquent property taxes, county treasurers protect the majority of taxpayers who pay their taxes on time. In most counties that is 95 - 97 percent of property owners. Of the remaining three to five percent, many are slumlords and out-of-state investors in the larger counties, who speculate in the risky business of substandard real estate. 

If foreclosure is necessary, it is the result of three years of tax delinquency. State law requires county treasurers to sell foreclosed properties at a public auction to make up for the tax revenue lost by the local government, county government, schools, special millage, public transit systems, road commissions, veterans millage, and other taxing units. The law also lets taxpayers walk away clean from the foreclosure, without debt to mortgage companies, lien holders, and other debtors of the property. Paying left-over auction revenue to previous owners of foreclosed property, as suggested by recent lawsuits filed against Michigan’s county treasurers statewide – many which have been dismissed by circuit courts, would reward bad behavior. It would force the Treasurer to act as an unpaid and unlicensed realtor for those who have not paid their taxes. Under current law, if county treasurers returned auction revenue to previous owners they would be in direct violation of civil and criminal state law. 

In most counties, funds raised go to a regulated foreclosure stabilization fund to pay back taxes from previous years’ shortfalls, expenses of the forfeiture and foreclosure process, and to cover legal expenses. Tax foreclosure most often deals with abandoned, blighted, or challenged properties which lose money at tax auctions. When property sells for more than taxes due, the funds are used to ensure that on-time taxpayers do not pay the high costs of tax delinquent and tax foreclosed properties. Sales on high-value properties pay for public losses on low-value properties. Unfortunately, there are many bad actors who intentionally evade property taxes and use county government like a free real estate lender. County treasurers work hard to hold these bad actors accountable. 

The purpose of Michigan’s foreclosure law is to prevent foreclosure or return tax-reverted properties to productive use so they do not damage neighborhoods or surrounding property values. County treasurers throughout Michigan understand the limitations of the law. We do not foreclose on properties for trivial amounts such as $5 or $10. Sound judgment and insight is required. Each foreclosure is looked at individually. 
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Foreclosure is indeed a tragedy. Abusing county treasurers doesn’t help. Socializing the losses on tax- foreclosed properties and letting previous property owners profit from the foreclosure is a bad idea. It would unfairly shift the burden of bad tax debts onto the backs of those who meet their responsibilities, hurt our local units, (cities, townships, school districts, libraries, and other taxing units), negatively impact financial institutions, damage the real estate industry, and create significant legal problems for all concerned. 

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