It’s no secret that politicians, banks and consumer groups have learned how to use negative press to their advantage when seeking to sway public opinion about a particular issue. And within the state of Texas, they’ve spent alot of time, energy and money trying to change the public perception of the entire property tax lien process and especially companies like ours (link to home page) that offer property tax loans.
But with so much effort spent trying to change public opinion on this subject, why is it that Texas lawmakers continue to stand behind the concept? The bottom line is that these loans are handled in an ethical manner and have a tangible benefit to consumers.
How Property Tax Loans Work in Texas
First, let’s begin by clearing up some of the confusion that surrounds property tax loans in Texas.
In spite of their name, they’re not actually loans! In fact, most industry folks refer to them as tax lien transfers which is a more accurate description of the function they serve.
That being said, it’s true that the overall process does have some traits in common with traditional loans which is why they’re often lumped together.
Here’s an overview of a typical tax lien transfer:
- A homeowner or business owner falls behind on their property tax obligations and begins to look for ways to protect their property as well as limit the damage from additional legal fees and penalties
- The process of transferring a tax lien allows a third party to pay their property tax bill when they are unable to do so, thus making sure they retain property ownership and are able to maintain other bills.
- It’s not a loan - it transfers the tax lien to the new holder
- The new lien holder pays off the tax lien with a lump sum payment
- Taxing authorities receive their revenue
- The property owner then makes affordable monthly payments to the lien lender on a set schedule
Despite what banks and consumer groups might have you believe, these lien transfers are a simple yet effective tool for home and business owners which is the main reason why regulators continue to allow them to take place.
Industry Regulations Are Evolving
In addition to these obvious consumer benefits, one of the primary reasons lawmakers continue to support Texas tax lien transfers is because the industry is continually evolving thanks to ongoing input from regulators including the Office of Consumer Credit Commissioner, Texas Finance Commission and state legislators.
Areas of our industry which are now regulated include:
* Required disclosures
* Required notices
* Foreclosure Processes
* Licensing for companies and individuals
* When a transferee can pay taxes on behalf of the property owner
* Safeguards for property owners and pre-existing lienholders
Additionally, a group of professionals within the industry has formed their own association called the Texas Property Tax Lienholders Association with the goal of raising awareness about the industry and increasing professional standards among it’s members.
Side Effects of Increased Competition
The final piece of the puzzle as to why regulators continue to allow these loans is driven by the market. Specifically, over the last few years increased competition has forced property tax lien lenders to offer lower rates and closing costs in order to get business.
This sort of competition benefits consumers who wind up with lower closing costs and interest rates. Still not convinced? Look at this downward trend in closing costs since 2008:
In summary, despite what you might hear or read in the media about the evils of the property tax lien industry in Texas, the fact is this is a closely regulated industry that provides an important service to consumers.