Several defendants in a class action suit regarding municipal tax lien certificates (TSCs) have reached agreements on settlement proposals.
are now parties in a suit claiming that they were victims of a conspiracy. The homeowners were either facing foreclosure or had been foreclosed upon.
Many of the more than two dozen defendants in the federal suit are among those pleading guilty to federal criminal charges.
One defendant, Crusader Servicing Corp., purchased a lien in Lebanon Township. In March 2012, the owner of that home was the first to file suit in Superior Court in Hunterdon County. The suit was transferred to federal court and then consolidated with other suits like it.
So far, 17 defendants have reached six different settlement agreements. Attorneys for the property owners are asking the court to certify the proposed settlement class and to give preliminarily approval to five of the most recent settlement agreements.
A hearing is scheduled on the matter for Aug. 5.
Under the proposed settlements the tax lien holders will offer discounts of 10% to 15% for property owners to redeem the certificates. The lien holders also agreed to delay any foreclosure proceedings until at least 90 to 120 days following approval of the settlement.
The defendants also made payments to a settlement fund.
Due to the number of property owners involved, the attorneys are seeking a delay of having to notify all the potential class members until the settlement fund reaches at least $1 million, or for two years, whichever comes first.
So far the settlement fund totals $955,000.
Attorneys are still negotiating with the other defendants.
The Department of Justice said that the conspiracy limited competition in public auctions for municipal tax liens so the liens could be purchased at higher interest rates, many at the maximum 18% interest rate.
When the owner of real property fails to pay taxes on that property, the municipality in which the property is located may attach a lien for the amount of the unpaid taxes. If the taxes remain unpaid after a waiting period, the lien may be sold at auction.
State law requires that investors bid on the interest rate delinquent homeowners will pay upon redemption. By law, the bid opens at 18 percent interest and, through a competitive bidding process, can be driven down to zero percent. If a lien remains unpaid after a certain period of time, the investor who purchased the lien may begin foreclosure proceedings against the property to which the lien is attached.
"Plaintiffs and members of the proposed Class are New Jersey taxpayers who became delinquent on their real property tax obligations, often as a result of disability and/or economic hardship. Because of the unlawful conspiracy, Class members either paid or owe Defendants an inflated amount in order to redeem their TSCs, and keep their home or other property from falling into the possession of one of the Defendants. Indeed, some class members have already lost their properties as a result of Defendants’ illegal behavior," the complaint says.
The tax lien auction process is meant to create "competitive bidding in an effort to try and help the delinquent tax payer who is already likely experiencing financial difficulty," the complaints says. Even in the absence of collusion, the lien process can often lead to harsh results for the property owner, the complaint says. Some of the defendants failed to pay a few hundred dollars in taxes and ended up owing the lien holder tens of thousands, according to the complaint.
"The Defendants’ conspiracy alleged herein acted to make it even more punitive by colluding and artificially raising the interest rate associated with the property owner’s delinquent obligation. Quite simply, the defendants’ conspiracy was akin to pouring salt in the wounds of plaintiffs and the members of the Class," the complaint says.
