Limited ways to help

Tax-lien sales have long been a niche industry, but in recent years, the pool of investors involved has shrunk in Maricopa County. Traditional buyers have been crowded out by large financial institutions that now make bulk purchases of liens at auction. The winning interest rates have nosedived, making each lien less profitable for investors and forcing out smaller companies who can’t afford to buy in bulk.

“Smaller investors are happy to just get liens with great interest,” said Eric Kessler, one of the most prominent attorneys who represents lien investors. “Historically you could expect to get 8 to 10 percent return on investment if you bought enough liens.”

But five or six years ago, Kessler said, big banks and other major investment firms poured into the market, bidding down the interest rates on the liens.

“This left smaller investors in the lurch,” he said.

One of these smaller investors was Stan Harrison, who ran a small Oklahoma-based firm investing his and his family’s money. He had been buying liens in Maricopa County for years, with nearly 200 in 2010 alone, but soon left the entire industry for good.

“When I first got involved in tax liens, the big banks were not involved,” he said. “Because of low interest rates in our economy, they were forced to go where the rates were best, so they got heavily involved in tax liens and they could flood the bidding. Basically they crowded guys like me out . ... Big banks rule the roost now.”

Those large institutions have included subsidiaries of major banks, including Bank of America and JPMorgan Chase.

In 2010, there were more than 535 bidders in Maricopa County’s tax lien auction. By 2016, there were less than half of that — 208.

Kessler said the entrance of big banks has shifted focus in the lien business, because the lower interest rates mean the only way to turn a big profit is by taking a property.

“Most of the investors are large funds,” he said. “Many investors are pumping millions of dollars into lien investments knowing that they are going to hold onto these for three years. Essentially they are willing to purchase non-performing assets — liens below 2 percent — on a grand scale, just to hold them until they can foreclose.”

Seventy-four percent of the winning bids for liens in Maricopa County, where bidders can easily access online auctions, were from out-of-state investors, according to an analysis of auction results from 2010 to 2016. Some investors bid from Canada and, in 2012, an investor from Singapore bought five tax liens at auction.

Even though investors from around the country and world buy tax liens in Maricopa County, the top buyers are a select community of major investors. And so are their local attorneys.

The same four attorneys — Becker, Kessler, Heather Hendrix and Mark Manoil — represented investors in 83 percent of foreclosure proceedings in Maricopa County.

The two companies Hendrix represented, a Nevada-based LLC called National Tax Lien Redemption Services and its Arizona subsidiary, together foreclosed on more properties than any other investor. And 139 of those foreclosures, or 59 percent, were primary residences.

Becker’s company, Kolonia, successfully foreclosed on the second-most properties in court, but only 23 percent of them were primary residences. Many of his wins were vacant land.

“Our attitude is that we go for the interest and, if we get property, we just lucked out,” he said. Scattered government efforts to protect homeowners on the edge have had limited success.

In 2015, former Maricopa County Treasurer Charles “Hos” Hoskins worked with legislators to pass a law permitting homeowners in every county to make periodic payments of back taxes to lien holders rather than paying one lump sum.

But Maricopa is the only county to institute the program. Other counties feared it would deter investors from buying liens and replenishing county coffers.

Royce Flora, current Maricopa County treasurer, conceded that some investors weren’t too happy about any program that makes it easier for homeowners to redeem their liens.

But, he said, “My job isn’t to make investors rich. It’s to keep people in their homes.”

Maricopa has also been the only county to have an Elderly Assistance Fund since the state authorized it in 2007. That cut property taxes for many low-income, elderly homeowners. But it was funded by higher interest rates on delinquent property owners trying to redeem their liens. Essentially, it helped one group of on-the-edge taxpayers at the expense of another.

The fund is nearly out of money, and Hoskins said he fears that means many more homeowners will be unable to pay their taxes — boosting tax lien sales and foreclosures yet again.

“What we have is nearly 14,000 lowincome homeowners out there who are going to lose their credit and their taxes are going to go up,” he said. “They probably are making the choice between food and meds.”

Since the foreclosure, Miller hasn’t returned to her father’s house. She said she wishes these types of resources were available when her family was facing the loss of his home, although she still doesn’t blame anyone but herself.

“There could be a flaw in the system, but the way I see it, it is each homeowner’s responsibility to pay those taxes,” she said. “I’m the oldest in the family, so I feel it should’ve been my responsibility to watch out and take care of the property . ... I kind of feel like I let down the family. I let down my Dad.”

This article was prepared for an investigative reporting course at the Walter Cronkite School of Journalism and Mass Communication at Arizona State. Also contributing to this story were Ryan Santistevan, Lily Altavena, Nicole Tyau, Kelsey Hess, Joshua Bowling, Sarah Jarvis and Ben Moffat. The work was overseen by Donald W. Reynolds Visiting Professor Walter V. Robinson, the former editor of the Boston Globe Spotlight Team. His email is wvro bins@asu.edu.