Housing Services/Tax Reversion Project

Legal Services of Eastern Michigan - 020006

Abstract Number: 020006

January 2002

Legal Services of Eastern Michigan (LSEM) created this tax reversion project to assist people in obtaining hardship extensions to prevent foreclosure on their homes for failure to pay property taxes. LSEM worked with the County Treasurer in Genesee County to try and prevent home seizure. The County Treasurer hired LSEM to contact each homeowner (there were 1460) who was scheduled to lose their home. LSEM offered one-year delays in paying back-taxes, referrals to reputable lenders as opposed to predatory lenders, and assistance in other ways to save homes. LSEM worked with local banks through CRA to get loan packages that waived fees.

LSEM also provides free title searches through the County Treasurer. Just prior to the foreclosure proceedings, LSEM was again hired to contact the remaining homeowners. There were 234 persons remaining. All these homes were visited a second time. LSEM also appeared at the foreclosure hearings to represent persons eligible for income hardship deferrals who were not listed as homeowners, because they had never filed for a homestead exemption. Fewer than 20 homes were ultimately lost out of the list of over 1400.

For those persons who received a one-year waiver, LSEM will represent those income hardship cases to waive or lower future taxes.

LSEM is now working with the Treasurer to convert homes that are taken into low-income opportunities. First, all homes are inspected to assess rehabilitation needs. Tenant occupied homes are being turned over to local non-profit housing agencies to manage. Those agencies can then purchase the properties for the cost of back taxes. They can either be maintained as low-income rentals or sold to tenants to create homeownership opportunities.

LSEM is working with the Michigan State Housing Development Authority in an attempt to distribute Section 8 vouchers. These can be made available for local non-profits administering low-income rentals.

Upon sale, the non-profit can recoup all costs plus administrative expenses. Any remaining profit goes into a revolving loan fund. This fund is being set up as a land bank. LSEM participated in negotiations with Fannie Mae that may include funding of the land bank for up to $5,000,000.

High-income properties are sold directly by the Treasurer to the private market. All funds above the tax due go into the revolving loan fund. That fund can be used for demolition, rehabilitation or the like. Commercial and industrial properties will be sold if marketable, to fund the loan fund.

Negotiations are underway with local banks to provide both loans for back taxes, loans to tenants for home purchase and rehabilitation, and leveraged funds for non-profit rehabilitation.

For the numerous properties in need of demolition, the fund will be used for the demolition costs. The properties then go into a land bank. Where possible, the properties are aggregated for future development. Many will be sold to neighborhood groups, adjoining property owners and the like at $1 per lot. Costs will be recovered through a modified Tax Increment Financing.

Initial start up funding for the revolving loan fund is expected from Fannie Mae.

Contact Information:

Edward Hoort
Executive Director
Legal Services of Eastern Michigan
436 South Saginaw Street
Flint, Michigan 48502
Phone: (810) 234-2621
Fax: (810) 234-9039
Ehoort@lsem-mi.org

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