Michigan Association of County Treasurers Responds to Lawsuits

"What we had was a situation where state tax law was in conflict with the new Supreme Court ruling."

Michigan County Treasurers are speaking out after word of state and federal lawsuits over the proceeds from tax foreclosures.

We reported last week that an attorney has filed class-action lawsuits in 19 counties, and is working on a federal suit against 43 counties – claiming that treasurers are going against a state Supreme Court ruling. At that time, 9&10 contacted two of the affected counties in northern Michigan, but we did not receive a response from our request for comment.Property Tax Foreclosure

That ruling from last summer says treasurers should return surplus proceeds from a foreclosure to the property owner. Now, the Michigan Association of County Treasurers tells us, it’s only been in the past 30 days that lawmakers have helped outline a process for filing a claim for surplus funds.

Bob Robinson is the First Vice President of the Michigan Association of County Treasurers, and is also the Treasurer in Eaton County. “There is a new pathway put into law about 30 days ago (Public Acts 255 and 256), which now gives anyone who loses property in tax foreclosure, a pathway to file for a claim on the surplus funds that are made when a treasurer forecloses a property and takes it to a public tax auction in order to make the back taxes.”

He says, “Treasurers are bound by state tax law. Everything we do must comply with the General Property Tax Act and tax law. So when the Supreme Court ruled Treasurers could not keep the surplus revenue from a tax auction sale, the problem we dealt with was the state law did not accommodate any way for us to pay those surplus revenue back to property owners who lost their properties in a tax foreclosure. In fact had we done so, we would have been in violation of state tax law. It would have been actually a criminal act.”

The MACT says state tax law was in conflict with the state Supreme Court ruling. Now that’s being fixed, and homeowners will be able to file a claim to have a judge review the surplus from a foreclosure. “We are playing catch-up when it comes to tax foreclosure and making adjustments to the foreclosure process in order to comply with that Supreme Court ruling.”

Mact TreasurersRobinson also points out that homeowners aren’t the only ones in line for that money.  “The person who’s occupying the home, or considered the homeowner, in many, many cases is not the only person who holds an interest in that property. You have, possibly land contract holders, maybe creditors who have liens on the property…. Those people also have the opportunity through this process to file a claim if there is any excess proceeds so they can recover any equity that they held in the home.” He adds, “Obviously we won’t be able to pay surplus funds back to somebody if there is, for example, a mortgage company who held a mortgage on the property and needed to be paid off.”

Robinson says the claims process is still being worked out and shared with county treasurers. “That claim then goes back to the judge who ordered the foreclosure, who then will decide how the surplus revenues, if there’s any made at the tax auction, will be dispersed. So that any other lienholders and mortgage companies as well as the previous owner can make a claim on any equity they held in the property.”

Robinson also believes Treasurers will work hard to help homeowners avoid a tax foreclosure. “Treasurers all across the state will do anything possible to avoid a tax foreclosure to begin with. It’s always better to keep people in their homes. That’s really the best solution for everyone. There’s a lot of people having difficult times and we want to be prepared to help those people as much as possible. The best call someone can make if they find themselves facing a tax foreclosure, is to their county treasurer. We work hard to make resources available so we can help as many people as possible stay out of foreclosure. In fact in 2019 we prevented 97% of foreclosures that were moving into tax foreclosure.”

In an email to 9&10 News, Oscoda County Treasurer William Kendall added, “County Treasurers bend over backwards to help people stay in their homes.  We do not want to foreclose.  There may be a few cases where better judgement should have been made, but thousands of homeowners have been helped by County Treasurers through payment plans.” He also added, “These taxes go to fund your hospitals, police, ambulance, councils on aging, libraries, veterans, etc.”

In a statement from MACT spokeswoman Carrie Rathbun Hawks, she points out that “counties have to recoup not only the unpaid taxes from the tax sale proceeds, but also the interest, penalties, fees and any costs they may have incurred to bring a property up to code to be saleable. What’s earned at a sale/auction is not straight equity. Many foreclosed properties actually end up in a net loss to the county.”