1. What is really crazy is that this article was posted on the Detroit News website today while I wrote an article about a new way to collect property taxes yesterday. In this article it states that the County Commissioner of Macomb County is suggesting to raise property taxes by almost 25% to make up for a ever growing defecit.

2. They are expecting to have budget defecits of almost $33 million in 2009 and $43 million in 2010. Really? The county that has a city that was rated one of the best places to raise a family (Sterling Heights) in the country year after year is that far in debt? How can this be so?

3. Of course the governments only plan of action is to raise property taxes to make up for the loss in revenue. It blows my mind why we even vote for anybody because it always seems like things get worse not better, regardless of what level of the government it is.

4. If the Macomb County Commissioners raise property taxes the full amount that they can it would bring in an extra $11 million dollars in revenue for the county still some $22 million dollars short of being able to cover next years defecit.

5. Sure, for a home that’s worth $200k that is only an extra $100 a year which is about $9 more a month. Not a big deal and for most people that still own their homes its probably something that can be done. Too bad many people are having to borrow from their home equity loans just to be able to stay current on their taxes. Good thing that people can still write off their property taxes on their income taxes.

6. The Commissioner from Eastpointe said that the county is in dire need of help because they do not want to lay people off and have to shut down programs. Some of these cuts include selling properties like the Martha T. Berry Medical Facility in Mount Clemens. About 430 county workers would be laid off. For the people that have retired with the county they would have to look at possibly freezing or making drastic changes to its pension and benefits programs. They would also charge property owners in the county’s northern communities like Romeo for instance to pay for the Sheriff to patrol those areas which are not being paid for now.

7. The main reasons why Macomb county is getting hit right now is due to decreased property values which results in the County assessor having to lower property values which lowers property taxes. With so many homes going into foreclosure they are losing a lot of revenue from those property taxes. Costs for their retirees from pensions and health benefits to the cost of inmate care at the prisons are all rising too. With so many vacant properties sitting around in the county because of people defaulting on their 30 year mortgages its easy to see why this is going down.

8. I know that a lot of this could have been prevented. How did this defecit get so big so fast? It went $2.7 million to $12 million in 3 years. I understand that gas prices, food prices, health care prices, and others have gone up, but almost $10 million in 3 years? That is ridiculous. Its easy to point the finger at the people in control because it comes back to poor planning. Isn’t that all that the government knows how to do in the first place? We can assume that they did not think that their citizens biggest employers of Ford, GM, and Chrysler would have tanked so fast resulting in job losses and lost tax revenue but they should of.

9. But who really cares about this defecit anyways? We are operating in the hole to begin with so whats the difference if we are $10 million or $100 million in debt. The US Government is trillions of dollars in debt and things are still moving (in the wrong direction). Why not just keep spending and keep people employed?

10. I guess I just don’t get how hard it is for anybody to run a government. I thinks its so simple. If I was the finance director for the county I would have said something like “we only have $1 million dollars in the check book which will last us 5 weeks. At that time if we do not get any more revenues we will have to shut down the government and its services until next year when property taxes are due. Since I AM A CITIZEN of this county I do not want to see my property taxes going up because I want to know what happened to the other $3500 I gave to the county (which I did not get a break down of where every dollar I gave them was spent).” Its so easy to raise taxes and say it will take care of everything but I have not seen one piece of evidence ever that supports higher taxes fixed anything. Raising taxes solves nothing. Hopefully you read my idea about using how much land you own as a way to collect taxes versus real estate values. The land issue would include businesses too. That’s right, Ford, Chrysler, and General Dynamics. Your large facilities are taking up large amounts of property and should be taxed accordingly.

Post from: The Top 10 Reasons

The Top 10 Reasons Macomb County Michigan Is Being Hit With A 25% Increase In Property Taxes

1. Right now around the country your home is taxed based on a percentage of what the value or home is worth based on what the county assessor thinks it is worth. As an example lets say your local county government has a property tax of 1% and your home was assessed at $300k. You would pay $300k x 1%= $3000 a year in property taxes.

2. This is a great system for the county when property values are going up because as your property value goes up the amount of money you pay in property taxes goes up. The county government does not look bad at all because they did not have to raise the percent to bring in more money, it was the market that did it.

3. For the most part people do not complain about paying a little more in property taxes because they have been told that the value of the property has gone up. Everybody likes hearing this news. Even to hear that it went up 10% in value in one year is pretty amazing. Using our $300k example would result in a new value of $330k and new property taxes of $3300. Not bad knowing that you could sell the house for $30k more and only had to shell out $300 more a year in taxes. Hopefully you played it safe and took out a 30 year fixed mortgage and are not worrying about a adjustable rate mortgage payment going up.

4. Never had property values gone up so fast as when they did during the refi boom of 2002-2006. Homes prices around the country went up anywhere from 30%-200%. This was just ridiculous. In a lot of cases new cities were created because of all of the home building going on. This resulted in a lot of new revenue for these cities to bring in to fund their police and fire departments. Let alone the Parks & Recreation, new government and school buildings and more spending.

5. This system seemed to be good for everybody because with the rising cost of real estate most people still felt ahead. What was really happening in the background was a real let down. Cities saw all of this new revenue coming in and decided to start investing in new buildings and spending on frivolous things just because they had the money.

6. Fast foward to the present and now home prices are dropping around 12% every quarter. This is erasing any or all of the gains each home owner has had in the appreciation of their real estate investments. Never mind the people that bought their home in the past two years because unless they put a large down payment on their home they are probably upside down on their mortgage. There has also been the matter of all of these homes going into foreclosure. With the homes being foreclosed upon the county government is losing out on the revenue it gets from the property taxes it collected. Now the county is in a real bind because they assumed that property values were going to keep on rising just like they were doing over the recorded history of real estate prices. Since they were spending all of the extra surplus money they received to go out and buy stuff many county governments are now in debt and have no way to pay it back unless they make major changes. These major changes are doing things like laying off teachers, firefighters, police officers, county assessors (bad karma), road repair workers, etc.  

7. Now all of these home owners that were not complaining about paying a little more in taxes because of the previous values of their homes are trying to fight the county and city governments because the county assessor is not lowering what they think your property is worth. Even though you can go up and down your street and see homes selling for far more less than what you were assessed at. What a city assessor and an appraiser look at are similar and different in a number of ways. The appraiser is getting paid either way. The county assessor needs the property tax revenue to stay the same so he can still have his job.

8. Now the county needs to raise more revenue than what it was bringing in during the refi boom to make up for all of the homes in foreclosure and rising prices on things like gasoline to fuel all of the government vehicles, pay salaries, utility bills, etc. Would you believe that some counties are trying to raise property taxes on your declining property value? There argument is that you do want Police and Fire Departments, right? You do want a school around the corner for your kids, right? You want your kids to get picked up by a bus so you do not have to be late driving your kid to school, right? Looks like there is nothing you can do but play by the rules that do nothing but stick it to you. Many people were stuck in the whole taking cash out of the equity of the inflated value of their home to pay thinks and this included their property taxes and home owners insurance. Some sought out a home equity line of credit to help pay the increases in their tax bill.

9. Think about this for a second. How about instead of charging people what their homes are being assessed at, the county charges them by how much land you own? How many times have you seen homes that share a similar lay out and plot of land but one home owner really takes care of their home and wants to remodel their home with the newest kitchen cabinets, granite counter tops, etc? In the counties eyes the house that is better taken care of should pay more than the house that does not have all of the extras. But isn’t that really a shame. The people that do not put extra money in their house for new appliances or a new kitchen or bathroom should not be penalized. Its probably somebodys grandparents that have lived a certain way for the past 45 years and have not upgraded anything in the past 20 years. Their reason for it is if it ain’t broken don’t fix it. The house is probably clean and spotless, but just old in style. But they both own the same land. Do not penalize the people that upgrade and make them pay more just because. They should be getting the money they put into it when they sell the house for more than grandma and grandpa next door.

10. What needs to be done is the county governments around the country need to change the way they tax their residents. How it should be done is if you own a two acre parcel of land and your neighbor owns a one acre parcel than the person with two acres should pay twice as much. What needs to be done is the county government needs to actually follow a budget and say this is the amount of money we will need to provide the services we need. Each property owner will pay their property taxes based on how much land they own. Take the amount needed for the budget to be taken care of and divide it by the amount of acres the city owns. Then start breaking it down by .25 acre, .5 acre, 1 acre lots, and so on and so on. This way the value of the home is no longer a determination for the city to make. By doing this all county assessors would be let go of course, but this would free up one county job and save the tax payers money. I’m sure there are more jobs related to the assessor position but this is just a start. This will eliminate property owners having to go to a tax tribunal to argue that they should not be paying as much property taxes on their house because of the lowering values. I watched my dad had to go before the City of Eastpointe (in Michigan) Tax Tribunal to argue such a point on a couple rental properties he owns. He was able to get the taxes lowered by at least $100 on two of the three properties and none for the other. Eventhough the proeprty values declined in value over $7500 each on homes that are probably worth around $105k. That is around a 7% drop in one year. If the city would just base the taxes on what they need to make the budget work based on the percent of land you own in the city they would save themselves a lot of time and effort to do other things like I don’t know, find ways to lower taxes.

Post from: The Top 10 Reasons

The Top 10 Reasons Why Property Taxes Are Not Calculated Correctly And Need To Change

1. In most instances homes usually can have two mortgages placed as a lien against a property. Under normal conditions you can have a first mortgage and a second mortgage. Some companies during the refi boom were putting a third lien against the property. Local banks and credit unions were the ones that did the third lien.

2. When people are trying to refinance their home the mortgage company will look at their credit report and will contact the local city or county government office to pull up who is on the title of the home and any outstanding liens against the property. If you default against anything including credit cards or if you are behind with taxes these can be put as a lien against the property.

3. What these companies do is register the lien with the county and it is recorded. If you ever plan to refinance the home or sell it, those liens must be paid. In the event of a sale, when the title of the home is transferred it can only be switched with a clean title. No person will ever take a home with a bunch of back taxes and liens (unless they want to and see they are still getting a deal with the purchase).

4. Mortgage companies always want to be in the first or second lien position. The government is technically always in first lien position then the mortgage companies. The county will not let you refinance the home until the property taxes are paid up. Your property taxes are vital in funding the services your city provides like the Police and Fire Departments.

5. If the home was to go into foreclosure and the mortgage company let you refinance without paying off liens or collections than they would be last in line to get paid in the event of a short sale or sherriff auction. It goes by who registered the liens first. No mortgage company will take a risk on you if when everything is added up and you owe more than what the house is worth with all of the debts not being paid.

6. When your loan application documents start coming into the mortgage companies office and they see these outstanding liens it can deny your mortgage right then and there. If you do not have enough equity in your home to pay off all of your outstanding liens than no mortgage company will look at you. You are too risky to lend too.

7. Collections will follow you around forever if you do not take care of them. Lets say that you are a first time home buyer and you know that you have some outstanding bills you refuse to pay. You make good money and have enough money in the bank account to put a 20% down payment on the house. You just do not want to pay off those old debts because of a misunderstanding about the bill or you just hate that company. Unfortunately those debts are still on your credit report ruining your credit score. You call up a couple mortgage companies and they all tell you the same thing in that you have to pay the collections off before they can approve you on a loan. Of course this gets you mad because now with interest and late fees your old debts have gone up some 25% and you have to take the money out of your down payment to pay the debt off. The reason is because that collection account will follow you onto the house you are going to buy putting the mortgage company in second lien position.

8. Self employed people always have a tricky time when it comes to income taxes. Some defer their taxes for a couple years at a time because they do not have the money to pay them. One of the first things a mortgage company will ask a self employed person is if they can show how much money they make on your income taxes. If you tell them that you have not paid them but have an extension filed with the IRS it does not matter. You must file your taxes because the mortgage company does not know for sure if you have paid them or not and will not take the risk on you.

9. If you cannot pay all of these debts off when trying to refinance your home you might be better off not doing anything. As long as it is not property taxes because that is house the government can step in and foreclose on your home. Maybe you will have to look at other ways to get the money you need. If you can still afford your mortgage payment then maybe doing nothing at all is the best way to go. In some cases the credit card companies or other debtors will call you and negotiate a debt that is half of what you owe just so they can get money back in their doors.

10. Do your best to stay up to date on all of your bills and to never get caught with collections or liens on your credit report. Not only will you not be able to buy a home or refinance your mortgage it will also ruin your credit score. The IRS makes sure you are always up to date on your income taxes and your local government just wants you to pay your property taxes. Stay on top of your bills and debts and when you do you will then be able to find a mortgage company that will close on your mortgage.

Post from: The Top 10 Reasons

The Top 10 Reasons Collections, Property Taxes, Income Taxes, And Liens Must Be Paid Before A Mortgage Can Close

1. Mortgage companies love it when you tell them that you want to escrow your taxes and insurance with your mortgage payment. It reassures them that you are paying your taxes and home owners insurance every month and they get to manage. As long as you make your monthly mortgage payment there is nothing for them to worry about. The additional money you pay every month is collected by the mortgage company and put in a escrow account. When your taxes and home owners insurance are due the mortgage company will get a bill from your local city or county tax office and the insurance company and they just send them a check on our behalf.

2. Knowing that this is going to be taken care of by them many homeowners feel that this is comforting to know that its always going to be paid on time and its one less thing for them to worry about. The majority of homeowners elect for the escrow account thinking that they are coming out ahead. But are they?

3. The answer is no. Think about it this way. You are paying your taxes and insurance 6 or 12 months in advanced to a company to hold it in their escrow account. Not your account but their escrow account. What do you think this extra money you pay on top of your mortgage payment is doing? How about earning the mortgage company interest on your money. Since your property taxes and home owners insurance are not due for another 6 months its not like they are going to give up free money. They keep your money in their account and earn interest on it. Bet you did not want to hear that. This is such a cash cow for the mortgage company servicing your home loan. Not only will they know you are up to date with your property taxes and home owners insurance but they are just letting their bank account get fatter with interest you could have been earning. All because you want them to pay your bills.

4. Grow up already. If you can write out your monthly bill to pay your mortgage on time, why can’t you write a check to your county tax office or home owners insurance company on time. I know its depressing when you ahve to write a check out for a couple extra thousand dollars to pay your taxes and insurance (and it always seems that they are due around Christmas time) but think about how much you are giving up. I’m sure you didn’t buy the home in the first place thinking you could not pay your mortgage. So why go against your thinking to help out the mortgage company more.

5. As an example, let’s say your yearly property taxes and home owners insurance are $4,000. This would make your monthly esrow payment $333. If you had a 30 year fixed rate mortgage of $125k at 6% your principal and interest payment would be $750 a month. If you escrowed it would be $750 + $333= $1,083. Now, let’s put that $333 in a savings account that earns 2.5% -3%. You can find many online bank accounts like ING Direct and Emmigrant Bank that pay you these rates. If you put the $333 away each month and over one year your $4k would earn $120 at 3% in interest. This is for doing nothing but just putting it aside each month. The $120 is almost half of a month of escrow payments. A $120 might not sound like a lot but its better than giving the mortgage company the money.

6. Going back to the mortgage company if you let them escrow your money and they put it in a savings account earning them 3% its like you are paying them 9% interest on your money. The 6% from your 30 year fixed rate mortgage and the 3% they are earning on your money in interest from your escrow. Sucks seeing that. Take your money back and earn some your self.

7. Some county tax offices and home owners insurance companies will offer you a discount if you can pay ahead of time. It might not be a lot but if you have the extra money laying around to do it then why not. If the discount is more than what you could earn in interest in your savings account then the opportunity cost to do it far out weighs not doing it. If you asked your mortgage company to do this for you they will not do it and why would they. They will not earn interest on your money and they do not care about paying less taxes with your money. All they need to do is have your check post dated one day before its due. This way they can earn maximum amount of interest off of your money.

8. One of the biggest complaints with mortgage companies is that they screw up the escrow accounts anyways. If you plan on refinancing your mortgage with a different company than your current one than the new one will have to set up a new escrow account. Whatever money you had in your previous escrow account will be sent to you in a check within 10 days after closing but now the new escrow account needs to collect more from you to have at least 2 months worth of reserves. This is a policy most mortgage companies make. They want the two months of additional cash in there in case your state or county raises property taxes or if your home owners insurance company does the same. So with our example above with $4k, they really need $4,666 laying around earning them interest. If you ask to pay your taxes and insurance separately most mortgage lenders charge you an additional cost of .25% of the loan amount to do that. On our $125k this is $312 on top of your normal closing costs. Its like they want to earn more money from you some way or another. If you plan on buying a home I hope you have more than just your down payment and closing costs saved up. If you plan to escrow you will need your down payment + closing costs (no such thing as a no closing cost mortgage) + 2-6 months worth of escrow (need to put that reserve in there for the mortgage company to make sure they have enough to pay your taxes and home owners insurance) + any money that the previous home owner has paid on the tax bill for that property up to date. This can be a shocker for most first time home buyers because they did not know about the extra money for the escrow. Sometimes this will dis-qualify them for buying a home all together because they do not have enough saved up.

9. When your property taxes and home owners insurance goes up so will your monthly mortgage payment if you have it escrowed. It might only be $10 but it does go up. You will get a notice but I’m sure its a notice you do not want to see. If you did not have them escrowed you could deal with the county office at your own time. Since you escrowed you have to make the full mortgage payment or you will get a late on your credit report dropping your credit score and possible declining you from future refinances or home purchases. If you are battling with the tax office over raised property taxes and refuse to pay them then it will not show up on your credit report until well after they are due. You have been saving the money so you have it but hate seeing the Government raise taxes just because they can. Keep on making your mortgage payment so you do not fall behind. If you escrowed you would be forced to make the higher payment.

10. Do the smart thing and budget to pay your taxes and home owners insurance on your own. By doing so you will earn interest on your money and have better control of what your money is doing. You will not have to worry about your mortgage company sending your bill to the wrong office or getting notices that you do not have enough in your escrow account to make the tax bill (it does happen sometimes). Don’t give the mortgage company any more money than you need to. It does look like our President is going to sign a law in reforming the whole mortgage industry pretty soon. All and all it looks like a good bill except for the part where he is making new home owners and people refinancing, escrow their property taxes and insurance. I hope that part of the bill gets taken out. I think he’s doing it so the mortgage lenders can have more cash reserves on hand to help them get through this financial disaster. If you need to refinance a home loan or plan on buying a home get it done before the bill gets passed so you do not have to escrow with your mortgage.

Post from: The Top 10 Reasons

The Top 10 Reasons You Should Never Escrow Your Property Taxes And Home Owners Insurance With Your Mortgage