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Unpaid property-tax bill could spur foreclosure

June 5, 2009

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Although our mortgage loan payments are up-to-date, we did not have the cash to pay the final installment on our property-tax bill due in April. Our lender has threatened to begin foreclosure proceedings if the tax bill is not paid immediately. Can the bank do this, even though our loan payments have been made on time?

Yes, the bank probably can begin foreclosure proceedings. Fortunately, you have a number of alternatives to keep the foreclosure wolves at bay.

Most standard loan contracts allow a lender to foreclose if property-tax payments aren’t made by the deadline set by the county tax collector or assessor. A tax lien always takes precedence over a bank’s mortgage: If the home is sold at a tax-deed auction or similar foreclosure sale, the bank could see some or all of its own interest in the property wiped out because the tax collector would get “first dibs” on the sale proceeds.

Call your local tax collector or assessor and explain your problem. The agency might agree to accept the past-due amount through a series of small installments. Hundreds of counties across the nation also operate programs that allow owners to defer or reduce their property-tax payments, especially if home values in the area have dropped, if the owner is suffering financial difficulties or if the owner is handicapped or over the age of 62.

The bank might be willing to help, because you have a good record of making loan payments by the due date. Aid can include a temporary reduction or suspension of your mortgage payments.

Refinancing your mortgage and drawing enough cash out of the deal to pay off the overdue taxes might be another alternative.

I went to the county recorder’s office to do some research on a home that I might want to buy. Records show that title to the home is owned by a woman “in severalty,” but only her name is listed on the deed. How can I find out who the other owners are?

There aren’t any other owners. “In severalty” means that the woman owns the property all by herself — any interest that another party may once have had in the home has since been severed.

I’ve always paid my mortgage and other bills on time, so I thought I had an excellent credit rating. When I went to refinance, however, I was told I have only an “above average” score — apparently because I have a few outstanding traffic tickets! The lower score means that I will have to pay a higher rate on my refinance loan. Since when did a homeowner’s driving record affect the rate that must be paid on a new mortgage?

That may seem unfair. Nonetheless, the practice is perfectly legal.

Law-enforcement organizations have always been frustrated by traffic scofflaws who won’t pay for their violations. To pressure those drivers into paying, a growing number of organizations directly report overdue traffic bills to the credit bureaus, and many others turn them over to collection agencies.

Either way, it damages a person’s credit score.

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