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BOSTON — Heeding calls from federal and state courts, the Massachusetts Senate has agreed to legislation aimed at preventing the continuation of so-called home equity theft.
An amendment added to the fiscal 2025 budget last week would eliminate a municipality’s ability to take a property owner’s earned equity beyond what is owed in unpaid taxes and “reasonably incurred expenses,” according to the office of amendment sponsor Sen. Mark Montigny. The measure would also apply to private companies that buy tax liens from towns and cities.
“I could spend a long time just talking about the outrage by using examples of the vulnerable people who have been ripped off, because that’s what it is. It’s thievery,” Montigny said during Thursday night’s session.
The New Bedford Democrat has sponsored similar legislation in multiple sessions. He redrafted this term’s proposal before the Senate unanimously adopted it, advancing an equity theft measure that now invites a response from the House.
The Joint Revenue Committee voted April 30 in support of an equity theft bill (H 4624) that incorporates components of eight bills including an earlier Montigny text.
The sponsor of one of those eight bills, Sen. Joanne Comerford of Northampton, said during the budget debate that she learned about the issue of equity theft — municipalities or private companies holding onto the total value of a home, far and above the cost of a tax debt — from two constituents who owed $65,000 in back taxes.
“It was a long process,” Comerford said of their ordeal. “And they prevailed. But had they failed, they would have lost $275,000 in home equity, their sweat, their pain, their joy, the things that they were saving for.”
A New Bedford Light investigation found that dozens of New Bedford property owners have lost their houses — and all the remaining equity in them — over tax debts that were just a fraction of the property’s value. In some cases, a private company that bought tax debts from the city foreclosed on properties to collect debts under $1,000. The company then sold those properties for as much as $212,000.
‘Home equity theft’ — in New Bedford and across Massachusetts
How one Boston real estate investment firm earned millions by foreclosing on property tax debts it purchased from cities and towns
This session’s action on equity theft followed a unanimous May 25, 2023, decision from the U.S. Supreme Court, which found that a Minnesota tax lien takings law — similar to the Bay State’s statute — was unconstitutional.
In Massachusetts, a Hampden County Superior Court judge then ruled on April 18 that takings of excess equity under state law, known as Chapter 60, violate Article 10 of the Massachusetts Constitution’s Declaration of Rights and the Fifth Amendment to the U.S. Constitution.
“The statutory scheme, in its present form, is untenable and requires Legislative correction,” Superior Court Judge Michael Callan wrote in his decision.
Two people in New Bedford have sued to reclaim hundreds of thousands of dollars in equity that they lost through tax foreclosures, The Light previously reported. They filed lawsuits in federal court against the city and the private firm that bought their tax debt.
Montigny said during debate that his revised text would apply retroactively to takings cases dating to May 25, 2021, and would make sure that the sale of an affected home is “done fairly” by a broker who does not have a conflict of interest related to the foreclosure.
Sen. Susan Moran co-chairs the Joint Revenue Committee and supported the Montigny amendment last week.
“Overall, we landed in a place that is more consumer-protective, which is certainly something that I favor and that I had lobbied for in the committee,” the Falmouth Democrat told the News Service on Tuesday.
Moran said the language would slash an interest rate on back taxes from 16% to 8% to be “consumer friendly,” extend a repayment period from five to 10 years, and make notice requirements to homeowners more “realistic.”
The Massachusetts Municipal Association, which lobbies for town and city governments, did not directly address the Senate vote in a statement on Tuesday, focusing on the Revenue Committee’s bill and looking ahead to “working with House leaders.”
“We have been partnering with the Legislature to find a legislative solution to this issue that clarifies practices under state law and aligns with the recent Supreme Court decision,” executive director Adam Chapdelaine said. “A recent Committee bill has been reported to the House, and we look forward to working with House leaders on making important changes to the law while protecting taxpayers and municipalities across the Commonwealth.”
Chapdelaine pointed out that local governments “depend on property taxes in order to provide essential local services” and said they “work extensively with residents to provide needed flexibility when residents face difficult times.”
The Revenue Committee’s equity theft bill (H 4624) was sent May 13 to the House Ways and Means Committee, a panel that can either be a direct launchpad to the chamber floor or a final resting place for bills that expire at session’s end.
Montigny’s language is now attached to the Senate version of the state budget, which is headed soon into private negotiations between Rep. Aaron Michlewitz, the chair of House Ways and Means, and Senate Ways and Means Chair Michael Rodrigues.
“This should not be the starting point of negotiations with the other branch or the executive branch,” Montigny said of the language approved as a budget policy rider. “This should be where we end up, or perhaps when advocates and others who have been aggrieved look at this, perhaps they’ll teach us even more. And our goal should be to make this the strongest bill in the country.”
Moran said she heard from multiple stakeholders this session, from the MMA to the Land Court. A spokeswoman said Tuesday that the court system was “grateful to have had the opportunity to discuss the proposed legislation” with legislative committees.
And, Moran said, her office also heard from Tallage, a private firm that buys municipal tax debts.
“And I’ll just say, it was a short meeting,” she said.
Montigny said the text of the “thick bill” leads any reader to one conclusion.
“We went from an anti-consumer, anti-homeowner law to a pro-consumer, pro-homeowner law — if we pass the strong provisions in this amendment,” he told his colleagues before the 39-0 vote.
New Bedford Light housing reporter Grace Ferguson contributed content to this State House News Service report.
