It Appears Detroit Homeowners Are Being Ripped Off By The Wayne County Treasurer

Steve Dibert, MFI-Miami

One of the really cool things about owning a company like MFI-Miami is that you never know where an investigation might lead.  Take for example, Detroit cancer mom, Kelly Parker’s case. This case is not simply about a woman sick with cancer who successfully took on the establishment and won, it’s about the what this case will evolve into in the next six months to year.

Kelly Parker’s case will evolve into something that will benefit thousands of homeowners in Wayne County.  This what happened when MFI-Miami began working on Lynne Lucas’ foreclosure in April of 2010.  While working on what appeared to be an illegal foreclosure who like Kelly Parker battled cancer, MFI-Miami uncovered what has now become a major problem for Fannie Mae, Freddie Mac and their post-financial apocalyptic overlord, FHFA.  For nearly 13 years, the foreclosure mills have been making the claim that the banks, Fannie Mae and Freddie Mac are exempt from state and county real estate transfer taxes for properties being sold into and out of the GSEs.  Fannie Mae and Freddie Mac, although chartered by congress are private corporations and are no more government agencies than other bailed out corporations like General Motors. Now thanks to the research done in the Lucas case, dozens of counties across the US are demanding millions of dollars of unpaid tax revenue from Fannie Mae and Freddie Mac.

Kelly Parker’s fight for her house uncovered a serious problem for the City of Detroit and Wayne County and it is one of the dirty secrets that is contributing to the mass exodus of people leaving the City of Detroit.  It is also one that has the potential of expanding the FBI’s ongoing corruption investigation of the government of Wayne County and the City of Detroit.

When we began researching Kelly’s property tax records, one of the first things my staff did was call several real estate agents to pull comparable sales in Kelly’s neighborhood going back to 2009.  We did this because something didn’t seem quite right with numbers on Kelly’s tax bills.  According to the tax bills for those years supplied by Wayne County Deputy Treasurer David Szymanski, it appears the City of Detroit and Wayne County were using grotesquely inflated values when calculating Kelly Parker’s tax bills.  According to Kelly’s tax bills, the City of Detroit was assessing the value of her home based on the following values:

2009:  $59,228

2010:  $52,120

2011:  $45,866

I had two Real Estate agents pull comparable property sales from Kelly’s neighborhood  for 2009, 2010 and 2011.  They found 7 sales in 2009, 6 in 2010 and 8 in 2011.  As you can probably already guess, those values were nowhere near the number supplied by Wayne County.  Here’s the average value on the properties they found:

2009: $12,430
2010: $9,851
2011: $8,357

As you can see, Wayne County used unrealistic values that were between 476% to 548% higher than what they should be.

These figures lead to an interesting question of how the City of Detroit and Wayne County could get away with this.  The answer is pretty simple.  The City of Detroit assumes that any homeowners still living in Detroit are in programs like FHA that require their taxes and insurance be paid into an escrow when the homeowner makes their monthly mortgage payment.   The City is also banking on the fact that the majority of homeowners like Kelly Parker won’t notice that they are being over charged.  They are also hoping Detroit homeowners are too lazy or are incapable of doing the math to figure they are being ripped off.

How Wojtowicz’s Annual Bonus Is Tied To This Potential Fraud

For the last 26 years, Wayne County Treasurer Raymond Wojtowicz has received $540,000 in bonuses based on the amount of unpaid property taxes he collects for the cities of Wayne County.  Most of this money is easy money because homeowners escrow their tax payments as part of their mortgage payments.   Mortgage servicers hold on to the homeowner’s tax payments as long as they can before they pay the actual tax bill in order to make tens of millions of dollars in interest from those escrow funds sitting in an outside bank and because these funds make the servicer’s balance sheets look good for the auditors.  So even if they pay the tax bill late with the penalty, the mortgage servicer is still making money and besides they usually just pass the cost on to the homeowner.  Usually it only takes a form letter from Wayne County to the frighten the homeowner into calling their mortgage servicer and demand they pay the bill.

Wojtowicz also takes advantage of a Michigan law that was created in the 1970s that has since been repealed that allows him to collect a bonus on the taxes he collects for the municipalities within the county.  Wayne County Deputy Treasurer David Szymanski says Wojtowicz is entitled to the bonuses , “He’s going to take the money, what he does with it, is his own decision. Whether he’ll keep it to feed his family, yes, he’s not destitute, he makes a good living. But he works very hard on behalf of the taxpayers,”

What Wayne County refuses to talk about are the legitimacy of the property values used to calculate the taxes that are also tied into the amount Wojowicz receives as a bonus.  Why should they want to talk about it? Wayne County is making money overcharging homeowners and Raymond Wojtowicz is putting part of that money in his pocket.  So why rock the boat of an easy job with a great pension fund and perks that would make the late Mayor Daley of Chicago envious.

Let’s use Kelly Parker’s house as an example.  Wayne County claimed she owed $9300 in property taxes for 2009, 2010 and 2011.  When MFI-Miami did the calculations according to Michigan law using her real property values, we discovered that with penalties and interest she owed roughly $4350.  Wayne County tried to over charge her $4950.

Unlike Kelly Parker who had the brass cojones to stand up and fight like a female Spartacus, most homeowners in Detroit won’t fight the county with spray paint and thats their loss because she stood up, she was able to get lowered to $500.  Using some rough math, let’s say 25,000 homeowners in the city of Detroit are escrowing their taxes and are being over charged by $5000 for three years like Kelly, that means Wayne County is pocketing an extra $41 million in tax revenue a year by ripping off Detroit homeowners.   Now let’s assume 5% of these homeowners end up in a tax foreclosure prevention program and work out a payment plan (with being charged 8% interest on top of the penalties and interest already being charged) with the county.  These payment plans bring in roughly an additional $800,000 in year in interest alone based solely on the $5000 being overcharged.

The only way to fix this problem is for Detroit homeowners to follow Kelly Parker’s lead and fight the system like an urban Spartacus.