Soaring home valuations released this month have left many homeowners with sticker shock. With some struggling to pay the taxes, 2022 could bring renewal to a contentious industry.
Property tax lenders offer desperate homeowners and businesses a way to protect their homes from foreclosure by offering high-interest instant loans. After years of steadily growing, the pandemic cut its fate short, but some see the conditions ripe for a comeback.
“After a couple of pretty rough years before, it’s definitely been a good year,” said Andy Cahill, president of Johnson & Starr, an Austin-based property tax lender that serves properties across the state. “I suspect this will be the best year we’ve seen in a long time.”
This year, Bexar County appraised the average homestead at just over $309,000, up more than 23% from the previous year, according to the Bexar County Appraisal District. Just five years ago, the average homestead appraisal was about $170,600, so higher tax bills will likely mean some homeowners can’t pay.
Cahill said the property tax lending industry saw strong activity in February and March, usually the busiest time of the year. In February, unpaid property taxes are overdue and the first notifications are sent. There could be an even bigger bump next February, when property taxes for 2022 come due.
It’s not just rising appraisals that are leading some to apply for a property tax loan, Cahill said, but also the end of moratoriums on evictions, which have only just begun match pre-pandemic numbers. Homeowners feel more pressure to pay arrears taxes as dues are due in a few years.
Critics often compare the industry to payday lenders, which also offer fast, high-interest loans to desperate borrowers. According to the latest figures from the Texas Office of Consumer Credit Commissioner, the average interest rate on these loans was 13.09% for residential properties and 11.87% for non-residential properties. Bloomberg reported last year that borrowers often end up paying more than double the face value of their tax liens.
While taxpayers have a variety of options to ease the pain — such as Whether working with the county on a payment plan, appealing estimates, applying for homestead exemptions, or getting your mortgage provider involved — tax credit companies promise flexibility that they advertise heavily through flyers. letters and posters.
The industry began thriving in Texas in the 1990s and grew steadily until the pandemic eroded its fortunes. According to state records, in 2019, property tax lenders processed a total of $198 million in loans that year. In 2020, that number dropped to just over $165 million. Total loan amounts for 2021, let alone 2022, have not yet been released when estimates began their sharp rise.
Peter Squier, the president of the Texas Property Tax Lienholders Association, predicts that “many more people will need help paying their taxes next January when the tax bills for the new estimates come due.”
Although federal funding has enabled the creation of a new state homeowner assistance program, not all will be eligible. And for those people, Squier said in an email, “the Texas-regulated property tax lending industry stands ready to provide tax loans that will save homeowners money and protect them from possible foreclosure on property tax defaults.”
Squier is also the president of Propel Financial Services, the San Antonio-based property tax loan firm that dominates the industry. According to its website, it is the largest property tax lender in the state.
Propel was co-founded in 2007 by Red McCombs, the San Antonio billionaire who made his living from car dealerships and radio. McCombs was acquired for $187 million in 2012, but he bought back the company four years ago for an undisclosed price.
“This is one of my babies that I want to grow into a very competitive financial services company.” McCombs told the San Antonio Business Journal back then. “In two to three years it will be a $100 million deal.”
McCombs and others in the industry argue that it offers flexibility for homeowners and other property owners, as he details in one opinion piece from 2013.
Cahill echoed the sentiment. “Once we have a customer, we don’t want to foreclose,” he said, because foreclosure would cut the credit relationship between the company and the customer – cutting off the cash flow. Missed payments are more likely to result in calls from a collection agency than foreclosure, he said.
Critics say there are less risky alternatives.
Nick Longo, who recently founded PropertyAxe, a company that uses data-driven techniques to help property owners appeal their valuations, called the industry “sharks.” He described his despair when he saw a billboard for them on the way to Austin, and said many of those targeted by those ads are the same ones his company could help.
Steven Scurlock, director of government relations at the Independent Bankers Association of Texas, described tax lenders as “irritating” the industry and exploitative for homeowners. “Often the consumer doesn’t understand what they’re getting into and it can create problems that go beyond tax arrears.”
His association has long campaigned at the Statehouse against the industry’s model, which disrupts bank-provided mortgages. He urged homeowners to reach out to their bank for help in situations where they can’t afford property taxes.
Michael Amezquita, Bexar County’s chief investigator, called the companies predatory. He said he sympathizes with homeowners who are experiencing rising property values and urged them to appeal their estimates, which he said have a 94% comparison rate. The process has has been made easier in recent years with online scheduling.
He also urged those struggling with taxes to enter into a payment plan with the county. Homeowners have several payment plan options, especially if the homeowner is elderly, has disabilities, or is a veteran or married to one.
Bexar County Tax Assesor-Collector Albert Uresti said homeowners can enter these types of payment schedules at any time — even now — and that the county also has flexibility. Those who miss a payment are subject to a 6% penalty fee and 1% interest.
More people use county payment plans than property tax lenders, according to figures provided by his office. For the 2021 tax bills, he said about 11,500 accounts — less than 2% of homeowners — opted for a county payment plan, compared to just about 700 that assigned their lien to a tax lender.
“Why go to Propel?” he said. “We have the same program here, and it’s a lot less risky.”
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