Banks Are Claiming Bogus Homestead Exemptions In RI

Banks and other lenders have saved hundreds of thousands of dollars on foreclosed homes in Providence, thanks to tax breaks that were intended to help homeowners, according to data obtained by GoLocalProv.

This year, 44 banks and other companies have foreclosed on just over 341 properties in Providence, as of September. But those banks retained owner-occupied homestead exemptions on about 200 of those properties. In all, the exemptions—some as high as 50 percent—saved those banks about $422,615 on their 2011 tax bills, a GoLocalProv review of city data found. (See below chart for the complete breakdown.)

To Brenda Clement, executive director of the Housing Action Coalition of Rhode Island, the exemptions were blatantly unfair: “You shouldn’t be getting an exemption if you’re not a homeowner,” she told GoLocalProv.

Six figure savings for big banks

Those banks that racked up the most savings in exemptions are some of the biggest names in the mortgage industry. Topping the list were Fannie Mae and Freddie Mac, two mortgage giants that are government-sponsored companies. Fannie Mae got a $121,722 in tax breaks on 61 properties it had foreclosed as of this month. Had it been billed at the full 2011 tax rate of $30.38 per $1,000 in value, the company would have owed an additional $121,000 in taxes.

Freddie Mac saw its total tax bill sawed nearly in half, owing $53,124, instead of the $101,582 it would have had to pay without the homestead exemption.

Other banks that gained the most were Deutsche Bank, Bank of America, the U.S. Bank National Association, and Wells Fargo. Those four institutions alone saved well over a total of $100,000 on their 2011 tax bills, according to the city data.

To Michael McCarthy, a member of Occupy Providence, it’s just another case of banks doing what they do best—whatever they can do to maximize profits for shareholders and investors. “They can’t be expected to use reason when they could otherwise use lawyers,” McCarthy told GoLocalProv. “I definitely don’t think the market is going to fix it for us.”

As the name suggests, the homestead exemption is meant for homeowners who live in their houses. But banks were able to collect this exemption as well if they filed a foreclosure deed after the annual December 31 property tax assessments. The exemption then was not revoked until the next annual assessment.

Read more here