Monday, September 17, 2007

Bankrupt AMH's Property Tax Checks Bounce

I heard about this from Savvy Saver - American Home Mortgage, the subprime lender who is in serious financial difficulty, has apparently been bouncing checks that it sent out to pay mortgage holder's property taxes in Maryland. Curiously, I can't find this story on CNN or MSNBC, but there is an article here. I did find a story from three days earlier about Freddie Mac trying and failing to take over loan servicing from AMH. However, AMH filed for bankruptcy protection before Freddie Mac could get the servicing rights.

There are a couple scary things about this. First, the escrow accounts of mortgage holders are supposed to be get separate from the other funds of the business. These accounts are protected by state law from bankruptcy proceedings, but there is a possibility the accounts were incorrectly frozen when AMH filed for bankruptcy. Being of a more cynical nature, I tend to think the company "borrowed" money from these accounts as their financial crisis escalated. We'll have to wait to see how this thing plays out to find out for sure. However, the big losers in this mess are the people whose property taxes were not paid. They are still responsible for the taxes and will need to find some way to pay the bill.

The second scary thing about this is this quote:

Anthony McCarthy, a spokesman for Mayor Sheila Dixon, said the city does not plan to notify the affected homeowners. They will get a notice in November along with all other delinquent taxpayers if the problem isn't resolved by then.

So your government officials aren't going to notify you until your taxes are past due and the penalties and fees have started accruing. That's nice. Instead of giving people an extra two months notice and more time to find a way to come up with the tax payment, they'll just hope the problem goes away by then. Yup, the mayor sure does care about her constituents.

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