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Friday, February 7, 2014

open letter to Rep. Mike Reese concerning PA Act 2013-93

Dear Rep. Reese:

I admit to being blindsided by this new law.  I can't comprehend how it was passed without being blocked by Realtors, mortgage lenders and title insurers.  I can only imagine that they didn't see it coming or couldn't conceive that the legislators would give it credence or didn't understand the full complexity of unintended consequences.

The system already in place for collection of delinquent property taxes in PA works just fine.  I hear that the impetus behind this law was Philadelphia.  I fail to see why the entire state must suffer for the failure of Philadelphia to manage its business.

The implications of this new law are still being digested.  

In short, when a title is searched, we are now required to discover ALL real estate owned by the vested owner in the county.  We then must check to see if there are any liened delinquent property taxes owed and then ALL of the liened delinquent property taxes owed for ANY properties owned by this entity will be considered a LIEN against ALL property they own in that county.

Here are some thoughts on how that might impact Pennsylvania residents:

1. A seller in a purchase transaction who is in financial distress having delinquent taxes on more than one piece of real estate in a county will have difficulty liquidating individual properties as there may not be sufficient equity in one transaction to cover all outstanding delinquent tax obligations. In these cases, buyers of the property would not be able to complete their transaction and by the time this information has been discovered are likely to have spent significant time and money on the potential purchase.

2.  A borrower in a refinance transaction who is in financial distress having delinquent taxes on more than one piece of real estate in a county will have difficulty liquidating individual properties as there may not be sufficient equity in one transaction to cover all outstanding delinquent tax obligations.

3. Large entities who take title to real estate following foreclosure such as FNMA, FHLMC, HUD, VA and lots of mortgage lenders are likely to have delinquent property taxes outstanding on multiple properties. I can only imagine the complexity of the search process, competing transactions taking place at the same time and deciding who has paid what at what time.  I just can't conceive of how these entities will cover shortages to pay all taxes as these REO properties close.  Perhaps they will simply advance funds to clear delinquent taxes on all properties as they acquire them, however, even in this case, we will have to live through a period of transition that might be crazy.

4.  Increased search time and costs which will be passed onto consumers in some fashion yet to be determined.

5. PA businesses including real estate offices, mortgage lenders, and title insurance agents such as myself will suffer loss of productivity and more importantly, loss of out of pocket funds expended for transactions which might have otherwise closed if not for this new law.

We had a good system in place for collection of delinquent property taxes.  Allowing transaction to close, always results in the delinquencies for each property to be resolved individually.  Now, with this new law, you are likely to see LESS collection of delinquencies as people are unable to move properties due to lack of equity sufficient to cover delinquencies on multiple properties.

Please review this with your colleagues and move for a repeal. 

Sincerely,

Diane Cipa
Resident of Ligonier Township
Business Owner in Ligonier Borough