History of Property Tax Lending in Texas
The Landmark of Property Tax Lending in Texas
The history of property tax loans in Texas dates back to 1933. They’ve changed a lot in the last 80 years. However, policies around property tax lien transfers continue to change today.
Property taxes are rising in Texas, and this makes property tax lien transfers an economic necessity for many in the Lone Star state.
We’ll take you through the history of property tax loans in Texas, talk about the major changes in their regulation, and give you an update on tax lien transfers today.
History of the Property Tax Loan
In 1933, Texas state Legislature allowed third parties to settle someone else’s property taxes—current or overdue—for the first time. This helped struggling property owners to prevent foreclosure.
Texas Tax Code officially added this practice in Section 32.06 in 1979, according to TexasPolicy.com. These early tax lien transfers were uncommon. They mostly involved a loan from the property owner’s family or employer rather than a third-party business.
Major Changes to Property Tax Lien Transfers
1995 was a big year in the history of property tax loans in Texas. In response to major increases in property tax rates and home values, lawmakers had to make property tax lending a more feasible commercial option.
That year, state Legislature made major changes to policies about property tax lien transfers. One policy allowed tax lending businesses to charge up to 18 percent interest. Previously, the cap had been 10 percent.
Another policy allowed non-judicial foreclosures. This meant tax lenders could foreclose on properties without a court order; this policy continued until 2013. Overall, these changes made tax lending a more profitable venture.
These were not changes sprung from greed, but rather consumer need. Property owners faced with higher-than-ever property taxes couldn’t pay. Without tax lien transfers, many would be forced into foreclosure.
Tax lien transfers gave property owners the economic flexibility many needed to recover from financial bumps in the road.
Regulation of Property Tax Loans
While policy changes benefiting property tax lenders did increase access to loans for vulnerable Texans, it also opened up the market to greedy lenders.
That’s why lawmakers have been continually coming up with new and better policy to protect borrowers.
Here are some major changes in regulation that have been brought in the recent years:
- 2005: The Legislature voted House Bill 2491 into law. This bill split potential borrowers into two classes: property owners and mortgage holders. Because property owners hold the lien on their property, they can use a tax lien transfer before their taxes are overdue. Such a possibility allows them to avoid the penalties and interest fees of delinquency. Mortgage holders, however, have to wait until they are delinquent to take out a property tax loan. This is because their property has another lien on it, belonging to their mortgage company.
- 2007: The Property Tax Lender License Act was voted into law. This requires new lenders to get a license to lend. It also made the Office of Consumer Credit Commissioner (OCCC) the overseer for the tax lien transfer industry. Senate Bill 1520 also passed, which requires lenders to issue a 10-day notice to the borrower’s pre-existing lienholders, such as their mortgage company. It also gave homeowners a 3-day period to cancel their tax lien transfer before the terms become concrete. Additionally, the Finance Commission was tasked with regulating the closing costs, fees, and miscellaneous charges added to a transferred lien. This, combined with the 18 percent cap on interest rates, limits the cost of borrowing for those just trying to pay their taxes.
- 2013: Senate Bill 247 established further protections to property owners utilizing tax lien transfers. It forbids lenders from dishonest advertising practices and from lending to individuals who are exempt from property taxes, among other things. Most importantly, it eliminated non-judicial foreclosures. Now, any tax lenders proceeding with foreclosure must obtain a court order to do so. House Bill 1597 also passed. The main thing this bill does is require taxing units to provide more payment plan options. This was done in hopes of decreasing the need for property tax lien transfers.
The state Legislature has voted on many other policies over the past 13 years, but these are the major ones. Positive change comes slowly, while the need for property tax loans rapidly increases.
Property Tax Lien Transfers Today
Texas lawmakers continue to vote on changes influencing the ongoing history of property tax loans. Aside from 2013’s House Bill 1597, however, their focus is generally on regulating the market for tax lien transfers.
There is little focus on lessening the need for such transactions. The fact of the matter is that the need for property tax loans has increased drastically in recent years.
As property taxes skyrocket, income and inflation increase slowly. This means the average Texan is gradually paying a larger percentage of his or her annual income in property taxes each year.
Texas currently has some of the nation’s highest property taxes. These are used to fund public services like schools, roads, parks and recreation, emergency services, and much, much more.
Because Texas does not implement a state income tax or high sales taxes, local governments rely too heavily on property taxes. If you find yourself overwhelmed at the sight of your property tax bill, know that you are not alone.
More and more Texans face outrageous property tax burdens every year. Property tax lien transfers are a flexible option for getting the money you need to avoid high delinquency costs.
Many regulations are in place to protect you, the borrower, from being overcharged. You’ll pay far higher fees and interest rates to your taxing unit for delinquency than to a tax lender for a loan to help paying property taxes.
Additionally, you’re far more likely to face foreclosure if you leave your tax lien in the hands of your taxing unit. Have questions about your tax lien transfer options? Call Direct Tax Loan (866) 723-0321 and talk to one of our in-office representatives today.
We’re happy to answer any questions or concerns you have. Our goal is to give you the economic flexibility you need to take control of your finances, avoid high delinquency costs, and avoid the risk of foreclosure.
About the Author: Direct Tax Loan is the largest online platform in the United States that connects top property tax lenders with residential and commercial borrowers. Regardless of where you are located in the state of Texas or Nevada, we’ll be thrilled to connect you with reputable lenders and help you pay off your property tax bill.