State lawmakers are considering a moratorium on foreclosures stemming from unpaid water bills, a move that faces stiff opposition from Baltimore City officials who say that many property owners would not pay without the threat of losing their homes.
Sen. James Brochin called Baltimore's tax-sale system under which homeowners face foreclosure over unpaid water and sewer bills "absolutely obscene." He said the city should rely on other means of leaning on residents who don't pay their bills, such as shutting off service or assessing late charges and liens that must be paid when a property is sold or refinanced.
"There is right and wrong, and in this legislature there are a lot of gray areas on issues," Brochin said during a hearing yesterday. "But to me, on this issue, this is dead wrong."
Increased scrutiny of tax-sale cases began after an investigation by The Sun last year showed that homeowners who owe just a few hundred dollars in municipal debts - including Baltimore City water bills - often are hit with thousands of dollars in fees from private debt collectors and can lose their homes if they don't pay.
At least 400 city homes were lost over debts other than property taxes over a recent three-year period, an analysis of city tax records and court filings by The Sun found. Most stemmed from unpaid water and sewer bills, though some also included alley re-paving charges, sidewalk repairs and even fees to register rental property.
Lawmakers have introduced other measures aimed at reducing costs or lessening the risk of foreclosure, and city officials say they are overhauling their collection efforts.
Stanley J. Milesky, chief of the city's bureau of treasury management, told lawmakers that 85 percent of homeowners with delinquent water bills pay them when threatened with a tax sale and possible foreclosure. He said a moratorium could jeopardize collection of at least $13 million a year, costs that could be passed on to all customers.
The legislative debate comes at a time of rising foreclosure rates in general. Yesterday, the Senate Judicial Proceedings Committee also considered a six-month ban on foreclosures on "deceptive" subprime loans. The banking industry opposes the bill, and lobbyists told lawmakers they are working with Gov. Martin O'Malley on another package of legislation to address that issue.
The tax sale process has recently come under fire from federal authorities looking into possible mail fraud and restraint-of-trade violations in tax-sale auctions in Baltimore and several Maryland counties.
In addition to the tax sale moratorium, lawmakers are considering legislation that would cap legal and other fees that can add up to thousands of dollars in addition to the unpaid bill amount and a proposal to raise the minimum amount of an unpaid bill that could trigger a tax sale from $100 to $250. Another bill calls for improved notification for homeowners who may be subject to a tax sale.
The Maryland Municipal League and the Maryland Association of Counties oppose a moratorium, saying that foreclosures provide valuable leverage. Each local jurisdiction decides which types of debts could lead to a tax sale.
Del. Maggie McIntosh, a Baltimore Democrat and chairman of the Environmental Matters Committee, said she would oppose a moratorium. "If you let these folks just not pay their bills, all users will have to pay for it," she said.
In November 2006, Baltimore's City Council withdrew a proposed ordinance that would have kept liens resulting exclusively from water bills out of annual auctions. High-ranking city officials have balked at such legislation but have been working on changes to address the issue.
City officials said they plan to send all water and sewer delinquency notices to both the owner and the tenant of rental properties and to expand the use of payment agreements under which homeowners can avoid a tax sale for up to a year.