Are Property Tax Lenders Financial Vampires?

Published by Research Editor on March 13th, 2015 - in Loans

Are property tax lenders (PTL) out to suck the last money from cash-strapped citizens? Are they trying to scam people and steal their houses? Or are they misunderstood?

Like vampires, werewolves, or other mythical creatures, property tax lenders are often accused of vile acts: stealing your property, attacking you with vicious fees, throttling you in the night by high interest rates, and using force. Let’s look at each of these to separate fact from fiction.

Stealing property?

Is a property tax lender secretly trying to get you to commit to a loan you can’t pay, so they can foreclose on (“steal”) your property and make money off it?

In fact, it is so unprofitable that the PTL is unlikely to foreclose at all. In 2013, out of 40,636 loans receivable by PTLs, only 103 properties were foreclosed on.

Attacking by fees and costs?

If PTLs were vampires, trying to suck all they could out of a dying victim, common sense would expect fees and costs to rise every year as PTLs tried to take more and more.

However, the reality is far different: closing costs dropped 44% from 2008 to 2014. And because of recent legislation, 12% of fees are no longer available for PTLs to charge. It is cheaper today to get a property tax loan than it was a few years ago.

Throttling with interest rates?

Well, that may be all well and good, but surely they’ve hiked up the interest rate to compensate for lower fees and closing costs, right? That’s what a vampire would do.

Put away your garlic and wooden stakes: interest rates have gone down. Recent data shows residential and commercial interest rates at 14.28%, compared to 15.46% in 2008.

That’s not all. The maximum allowed interest rate is 18%. If a PTL were sucking its victims dry, it would be charging the most it possibly could. But it’s not.

Using force?

While a vampire may try to break into your house, nobody forces a PTL on consumers. People choose property tax lenders among their many options for paying property tax loans.

In a report for the Texas Public Policy Foundation, Kathleen Hunker suggests that property tax lenders exist because they fill a need in the marketplace, a need that the government cannot fulfill with its payment options.

Misunderstood?

Low foreclosure rates; lowering fees, costs, and interest rates; and voluntary loans suggest that property tax lenders are not blood-sucking vampires, but instead are legitimate businesses seeking to work in ways that are mutually beneficial.

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