Banks that took bailout money were supposed to use part of the taxpayer-provided cash infusion to help customers avoid foreclosure, but instead, many of them are buying up struggling homeowners' tax debt.
The tax liens earn banks up to 16 percent interest, and if homeowners don't repay their debt within three years the banks can foreclose on their homes. Since the bailout in 2008, major banks have bought nearly 6,000 tax liens in Pima County that total at least $15.8 million.
Although the primary goal of the $700 billion bailout was to prop up struggling banks stung by the mortgage crisis, the government has criticized banks that took bailout money for not doing enough to help customers stay in their homes. In June, the U.S. Treasury Department withheld an estimated $24 million in combined monthly incentive payments from three - Bank of America, JPMorgan Chase and Wells Fargo - for not doing enough to help homeowners, and it could do the same for July. All three are among the biggest buyers of tax liens in Arizona.
And last month the federal inspector general monitoring the bailout issued a stinging report supporting the penalties.
Many banks dabbled in delinquent tax liens before the bailout, but they have ramped up their purchases many-fold since the housing market collapse and bailout money became available.
In the two years before the bailout, banks bought about $3.9 million in tax liens at Pima County's annual tax auction. At the last two auctions they bought $10.3 million. Additionally, they bought $4.1 million in liens outside the auction since the bailout.
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