DS News often discusses delinquencies and serious delinquencies on mortgage loans and their implications for the industry and the market. But a topic not heavily explored is habitually delinquent properties, or delinquent properties after 10 or more years of unpaid taxes. With the many issues tax liens could place on the mortgage holder, should servicers take a deeper look into these properties in 2017?
A recent report from LERETA, a national real estate tax and flood service provider, identified 167,112 properties as habitually delinquent across 39 states nationwide. Broken down even further, these properties were concentrated in the South and West regions with a combined 24 states represented. The Northeast has seven states represented with these delinquent properties, and the Midwest had eight states.
“I think there are a variety of reasons ranging from collectors not enforcing payment to possibly estate affairs where the owner has possibly died and there is no mortgage,” says Terry Cason, Data Modeling Analyst at LERETA. “We can't determine exact causality without further research collection records. However, many of the amounts are low, indicating that the property may be of little value.”
Many of these regions share similar trends when it comes to their serious delinquency rates, as reported by the most recent CoreLogic Foreclosure Report. For example, the South held some of highest rates with 4.1 percent in Mississippi and 3.8 percent in Louisiana.
“I fully expect this to continue given that the parcels were already delinquent for successive years,” adds Cason.
LERETA says that the analysis included 575 jurisdictions with an outstanding delinquency amount of $725,488,886 and average delinquency amount of $4,341 per property.
With all this said, though, the question still remains–what are the implications of these properties on lenders and servicers?
“Unpaid taxes as reflected by these parcel records can have serious ramifications and are subject to tax liens that may ultimately result in property loss,” says Cason. “The bottom line is, the mortgage lien is subordinate to a tax lien and places substantial risk on the mortgage holder. This is an area lenders should follow more closely.”