Michigan officials steal families’ homes to pad their budgets

October 21, 2022 | By CHRISTINA MARTIN
Model sitting on throne

Greed: an intense and selfish desire for something, especially wealth, power

 

The house on Diamond Lake was estimated to be worth between $3 million and $4 million.

It was nestled on the shore with other multimillion-dollar houses in the postcard-perfect Michigan setting. “Diamond is a very appropriate name for this beautiful lake,” one visitor to the area reports on TripAdvisor. “The water is crystal clear and sparkles when the sunlight dances on its surface. Water sports and fishing are a constant presence. You will see sailboats whenever the wind picks up a bit.”

It’s no wonder Cass County officials were so excited.

“This is a major asset,” the county treasurer boasted in a 2014 meeting with the Board of Commissioners. “This probably won’t happen again while I’m treasurer.”

Cass County didn’t purchase the house on Diamond Lake. It seized it.

The homeowner had accumulated a property tax debt of about $100,000, including interest and fees. That allowed the county to foreclose on the multimillion-dollar home.

“It’s a done deal,” the county treasurer said. “They’ve tried to send us a check for $100,000, and I’ve returned it.”

She encouraged the commissioners “to collectively do some brainstorming” about ways the county could use the lakefront property. They could hold a public auction to sell the property for a profit, or they could keep the home for a while to host conferences and other events.

Either way, it was a windfall for the government. Private emails between county employees noted the treasurer was “tickled pink” by the acquisition.

“Have you ordered a new living room set for it yet?” one employee joked. “When is the first cookout?”

Profiting from tax foreclosures

It is inevitable—and, frankly, reasonable—that the government must sometimes foreclose on homes to settle outstanding tax debts. At some point, if a person refuses to pay their due, the community needs recourse.

But in states that still practice home equity theft—foreclosures in which the government pockets more than it is owed, simply because it can—the government is incentivized to pursue foreclosures.

That’s why Cass County’s treasurer rejected the $100,000 check from the Diamond Lake homeowner in 2014; the county preferred to have the multimillion-dollar house.

It’s also why so many homeowners report being completely blindsided by foreclosure proceedings: The state has no incentive to make sure they’re informed about what’s at stake.

In these situations, the government isn’t acting as a fair-minded collector anymore. It’s behaving more like a predator. It deepens people’s debt with high interest rates of 12%-18%, then moves in to seize and sell their homes at a high profit margin.

For some government officials, it’s no longer about settling debts.

It’s about how much they can get.

Tawanda’s story

Tawanda Hall, a nursing assistant in Michigan, was shocked when she found out the government was foreclosing on her Southfield, Michigan, home in 2016.

“They put the notice on the side of the house, on the garage, and not on the front where everybody was going in,” she says.

Her family’s tax debt at that point was about $22,000. Her house, which she lived in with her husband and children, was valued by the county at more than $205,000.

For the Halls, of course, the house also had sentimental value. It was the house they’d fixed up together as a family. Tawanda’s husband, Prentiss, put up the fence in the backyard and had a beautiful brick pathway put in. Their daughter celebrated homecoming there.

“It had a real big family room,” Tawanda remembers, “so we were able to hold a lot of people in one spot, and be able to enjoy each other… Lord, there were a lot of memories there.”

Tawanda’s father-in-law offered to help the family pay off their tax debt so they could keep the house. “I went down to the city council building,” Tawanda recounted in a video interview with John Stossel . “They said no. They didn’t want our money.”

“They wanted your house,” Stossel guessed.

The county got Tawanda’s house.

And this is where things get interesting.

The Southfield scheme

Oakland County prepared to put Tawanda’s house up for auction. But because of Michigan state law, cities have “first right of refusal” at county tax foreclosure auctions. A city needs only to pay the tax debt owed on a house to acquire it.

The City of Southfield “bought” Tawanda’s house from Oakland County for the price of her tax debt—the same debt that Tawanda was told it was too late to pay off.

Then Southfield promptly transferred ownership of the house—for the price of $1—to a private company called the Southfield Neighborhood Revitalization Initiative, LLC.

But the Revitalization Initiative is not just any company. Southfield’s mayor is a manager of the company and a board member of the nonprofit that owns it. So is the city administrator. And this company has made millions from tax-foreclosed homes. The Detroit News reports that the Southfield Neighborhood Revitalization Initiative made as much as $10 million between 2016 and 2019 flipping homes they acquired in tax foreclosures. Officials have claimed the money has been used to serve the public good, and that they have not personally profited from it. But the Revitalization Initiative and its parent non-profit—led by city officials—clearly reaped the benefits of these transactions.

After several Southfield homeowners sued the company, the Michigan Court of Appeals ruled in 2019 that the city’s cozy relationship with the Revitalization Initiative is not against the law—but that doesn’t mean the court liked it.

“The fact that elected officials were using their political status for private financial gain by obtaining properties before they could go to auction following tax foreclosures is, at a minimum , troubling,” the court wrote, before calling the behavior of Southfield officials “shocking to the conscience.”

It’s shocking, but it’s also shockingly profitable: The Revitalization Initiative sold Tawanda’s house for $308,000.

Tawanda’s family didn’t get a dime from the sale, of course. “You wonder, how do people get away with that?” Tawanda asks.

Another shady Michigan county

Oakland County’s neighbor, Wayne County, has its own questionable history with tax foreclosures.

A 2017 investigation by Detroit radio station WDET and Bridge Magazine revealed that Wayne County had grown financially dependent on the stream of easy cash from selling foreclosed homes at auction. It needed that cash to erase its deficits and balance the budget. Between the 2008 financial crisis and 2017, Wayne County raked in $421 million from the sale of foreclosed homes and the high interest rate it applied to back taxes. The county even began including projections for how much money it could make off foreclosure auctions in its financial “turnaround plan”—even though, as one former county executive told Bridge Magazine, “foreclosing on people’s homes shouldn’t be a policy to sustain yourself.”

And then there’s the treasurer’s wife.

Wayne County has a policy forbidding treasury employees and their family members from bidding on properties in county auctions. It’s a reasonable policy: County officials shouldn’t personally benefit from orchestrating the seizure and sale of other people’s homes.

So people were surprised when the Detroit Free Press revealed in 2020 that the county treasurer’s wife had bought several homes from the tax foreclosure auctions her husband oversees.

“A Wayne County resident with property in tax foreclosure shouldn’t have to wonder if the county treasurer chose to seize his or her home because the treasurer’s relatives wanted to buy it,” the Detroit Free Press editorial board pointed out.

Was the treasurer apologetic when confronted with evidence of his wife’s purchases?

Embarrassed? Nervous?

Not at all: He told a reporter that the policy against employees’ family members participating in the auction was “intrusive and unrealistic” and he planned to change the policy.

The courts crack down

Michigan officials got a rude awakening in 2020, when the Michigan State Supreme Court sided with Pacific Legal Foundation client Uri Rafaeli in a particularly egregious case of home equity theft.

Oakland County had seized Uri’s modest rental house because Uri, an elderly man, accidentally underpaid his tax bill by $8.41. The county sold the unit at auction for $24,500 and pocketed everything.

PLF argued that what happened to Uri violated the Michigan State Constitution, which (like the U.S. Constitution) prevents the taking of private property for public use without just compensation.

Incredibly, Oakland County’s attorney defended the county’s racket by arguing that Michigan had become financially dependent on stealing from people like Uri.

“A ruling for the plaintiffs will ruin local governments,” the county’s attorney told the justices in oral argument. “That will come right out of schools, roads, firefighters, and other basic services.” Never mind that its gains were ill-gotten. The government’s argument seemed to be that home equity theft was keeping its coffers full.

Uri’s story appalled the court, which ruled that Michigan counties couldn’t keep surplus proceeds from tax foreclosure sales anymore. They could keep only enough to settle delinquent tax bills. Anything else needed to be refunded to homeowners.

The court ruling should have been the end of the fight.

But greed is a powerful motivator.

The cost of government greed

Tawanda Hal is still trying to hold the government accountable for stealing as much as $285,000 from her family. She and seven other Southfield homeowners are working with PLF in a lawsuit against Oakland County. If we’re successful, the lawsuit will prevent what happened to Tawanda from happening to anyone else.

This is a battle that Tawanda is forced to fight without the help of her husband, Prentiss. About six months after the county took the Halls’ home, Prentiss was found unconscious at his construction job. By the time he was discovered, his brain had been starved of oxygen for so long that he was left with severe brain damage.

“He wasn’t able to move, or eat, or anything,” Tawanda says. He died in hospice care shortly afterward.

Tawanda believes the stress from losing their home contributed to her husband’s death.

“How do you even sleep at night knowing that you’ve done this to several people and destroyed several families?” Tawanda wonders. “I just don’t understand.”

The government officials who maneuver predatory tax foreclosures aren’t thinking about the suffering of the families they leave behind.

They’re thinking about the spoils.

“Greed is a fat demon with a small mouth,” writes crime novelist Janwillem van de Wetering, “and whatever you feed it is never enough.”

This article originally appeared in the fall 2022 edition of Sword&Scales.