This is a very informative and in-depth article on the business of property tax lending in Texas, where people borrow at high interest rates in order to pay off delinquent property taxes. It’s not at all consumer-friendly. It’s a booming industry where lending companies profit and citizens are often left further in debt or even homeless. An old law dating back to the Depression allows a third party to pay off a homeowner’s taxes. In property tax lending, the home itself is collateral, and the lending company gets a lien on the house. If there’s a failure to pay back the loan, the homes can be foreclosed. Lending companies get their money before mortgage companies in this case because the lien must be paid off first.
“These high-interest loans are part of a multibillion-dollar industry native only to Texas and Nevada. The thriving business involves some of Texas’ most reputable entrepreneurs and large institutional investors. Propel Financial Services, the parent company of Rio Tax, controls about half of the Texas market. Backed by San Antonio billionaire Red McCombs, Propel claims in its financial disclosures to have never lost money on a loan. But there’s growing concern that homeowners take on unnecessary risk with property tax loans. And while demand is apparently high, their usefulness may be limited, especially after a recent change in the law that requires counties to offer payment plans to homeowners with delinquent taxes.”
–Caelainn Barr and Charlotte Keith, The Texas Observer, Published on Wednesday, July 9, 2014