Baltimore Backs Tax Sales: Use of liens to sell houses defended

The Baltimore Sun reports:

Baltimore is defending its practice of selling houses that have tax liens for unpaid water bills and other municipal fees, denying charges by a major national bank that the city is responsible for a recent increase in mortgage foreclosures.

The city defended the city's tax-sale practices in federal court filings this week as part of a groundbreaking lawsuit filed by Baltimore against Wells Fargo Bank.

The city alleges in U.S. District Court that the bank exploited African-American families in Baltimore by offering them higher-interest loans than they offered white buyers, stripping them of equity through refinancings and charging them excessive points and fees.

In March, the bank sought to dismiss Baltimore's lawsuit by alleging that the city, through its tax lien program, takes "foreclosure actions" against many more homeowners than the bank does -- about 19,000 from 2000 to last year. In a memorandum filed in U.S. District Court in Baltimore late Tuesday, attorneys for the city argue that Wells Fargo's dismissal motion should be denied and that the bank's conclusion that City Hall is responsible for Baltimore's urban ills is "palpably false."

"Defendants would have the court believe that Baltimore has intentionally 'unleashed' on its residents a program of tax lien sales that causes thousands of foreclosures for nothing more than a small unpaid water bill and the like," city attorneys said in opposing the bank's request. "Maryland law mandates that Baltimore conduct these sales."

City Solicitor George A. Nilson said the city's annual tax lien sale is in no way "voluntary" and explained that the bank's 19,000 figure includes all people who entered the "tax lien process," not those who actually lost their homes because of unpaid bills.

He called Wells Fargo's argument "irrelevant" and said the bank's attorneys are playing a blame game that will get them nowhere in court.

"The whole issue of our tax sale process has nothing to do with this lawsuit," Nilson said. "It's always easier to point the finger at the party that has accused you of doing something wrong, but that is not a legal defense."

A spokesman for the bank said the city is trying to make it a "scapegoat for broad social problems that have plagued Baltimore for decades."

No word yet from Warren Buffett on this one.