Homeowners' struggle to pay taxes during coronavirus crisis can squeeze cities, towns

Apr. 22--A number of property owners are having a difficult time paying their real estate taxes because of the financial crisis caused by the COVID-19 pandemic.

The reasons vary from job loss, to caring for a loved one suffering with the new coronavirus, to stock market investments that took a nose dive.

As a result, the number of requests to cities and towns to pay taxes late has skyrocketed, putting communities in the uncertain position of meeting their expenses.

CoreLogic, a mortgage service provider based in Irvine, California, appears to be making a similar request, and some municipal officials who spoke with the Daily News treat the development with skepticism. Others, including the Massachusetts Mortgage Bankers Association, say mortgage service companies are being inundated by homeowners who claim they can't pay their property taxes, making it necessary for those companies to consider late payments to cities and towns.

Every month, millions of homeowners pay mortgages that include funds set aside in escrow accounts that cover real estate taxes and property insurance. In many cases, banks and mortgage companies turn over the task of paying the real estate taxes to service providers, like CoreLogic.

Framingham receives $19 million quarterly from CoreLogic, which represents 38% of the $50 million the city receives quarterly in real estate and personal property taxes.

Mary Ellen Kelley, Framingham's chief financial officer, claims CoreLogic is contacting communities to see if they have extended their tax deadlines because the company might want to earn interest on the pile of cash it's holding.

Companies like CoreLogic typically have the money they need to make tax payments two to three weeks before the due date, according to Kelley.

"You don't want to make money off money you already have at the expense of taxpayers," Kelley said. "In my viewpoint this is taxpayer money, not the banks' money," Kelley said. "I want it paid (on time to cities and towns), or I want it back."

Emails to CoreLogic for comment were not immediately returned.

New state law

A new Massachusetts law enacted during the COVID-19 crisis gives communities the option to extend the current tax bill deadline by 30 days. Tax bills in the fourth quarter of fiscal year 2020, which runs from April 1 to June 30, are typically due May 1.

Framingham retained the May 1 due date, while Marlborough extended the deadline to June 1.

Eileen Bristol, Marlborough's city tax collector, said she received an email from CoreLogic within the past couple of weeks that asked if the city had extended its tax deadline because of COVID-19.

Of the $8.5 million Marlborough receives in quarterly property tax payments from mortgage companies, roughly $5.5 million is from CoreLogic.

Bristol pays a monthly mortgage on her home that includes a portion automatically taken out for real estate taxes and homeowners insurance. And a lot of banks, she said, typically send those funds held in escrow to companies like CoreLogic much earlier than tax payments are due.

"I hope they're not holding onto it for that reason," Bristol said when asked if companies like CoreLogic requested an additional 30 days so it can earn interest on the money its holding.

Jon Sorkin, executive vice president at the Massachusetts Bankers Association, said he's not aware of any banks or mortgage companies in his association asking municipalities for extensions to pay real estate taxes. Mortgage service providers, like CoreLogic, are not association members.

"If banks have monies in their escrow accounts, they're going to pay out monies in their escrow accounts," Sorkin said. "Could there be a service company or two asking for an extension? It's possible, but I haven't heard of that."

Deborah Sousa, executive director of the Massachusetts Mortgage Bankers Association, said service providers requesting extensions can be legitimate because millions of property owners are telling telling those companies that they can't pay their mortgages.

"Service providers are overwhelmed, swamped right now. So many people want financial assistance," Sousa said.

Timing is key

Timing is a key issue, according to Sousa, because if a large number of property owners didn't pay their mortgage on April 1, then service providers may not have enough money in the pot to pay cities and towns on May 1.

To highlight the impact of the financial crisis on service providers, the association points to a study by the Urban Institute, a nonprofit research organization in Washington, D.C.

The study said more than 2 million homeowners asked to make late mortgage payments just two weeks after President Donald Trump last month signed the CARES Act, a $2 trillion economic stimulus package. If 12% of those requests were granted for six months, then mortgage service companies would take a financial hit of $33 billion.

Other factors complicate the landscape for service providers, Sousa said, possibly making it necessary to make late tax payment requests. One is payments to cities and towns are typically done electronically, and with so many requests for late payments coming in reconciling those electronic payments is a challenge.

Another is the CARES Act doesn't require that property owners document financial difficulties caused by COVID-19. They only have to affirm them, which also slows down payments made by service providers.

Sorkin, the Massachusetts Bankers Association official, pointed out that mortgage companies and service providers need to pay real estate tax payments to cities and towns on time in order to maintain their lien position in the event of foreclosure. If they're late, then the city or town takes top position, and gets first dibs on sale proceeds if a property is foreclosed.

Whether property tax payments are due May 1 in Framingham or June 1 in Marlborough, they must come in on time so communities can meet their expenses.

Marlborough Mayor Arthur Vigeant said his city has enough money in reserve to cover May before tax payments come in by the June 1 deadline, but "it's not going to be easy for us."

"It's all a cash-flow issue," Vigeant said. "We'll make sure we have the cash to get through (May)."

Henry Schwan is a multimedia journalist for the Daily News. Follow Henry on Twitter @henrymetrowest. He can be reached at [email protected] or 508-626-3964.

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