The Housing Baloon Pricked By Foreclosures In Michigan

Posted in Foreclosures, January 29th, 2008 |

The housing boom swelled fat and round until suddenly the foreclosure pinpricked it down to earth. The main instrument was the sub-prime mortgage that peddled its ARM’s to all and sundry without checking the repayment capability of the borrowers. This led to foreclosures and foreclosed units are not taxed until a buyer turns up to pay dues. Michigan is the worst hit place. The housing boom inflated Detroit but that has not helped it from being deflated.

A strong prediction is that the localities will see a fall of $100 million in collection of property taxes. The state will lose $12 million in proceeds from sales tax. This is sending shivers down the governments – it will not be able to do its basic function of constantly expanding. The shrinking economy and dwindling populations has told on this year’s budget that could not extend beyond 8%. That too was possible only after new taxes related to confiscation that raised a hue and cry. Spending had to be cut. All this was before the foreclosure made its presence felt. Experts are wondering if the local government will be able to function at all with so many avenues of revenue being shut down. There is no doubt that the Michigan government is face to face with one of the worst crises in its history.

A suggestion has been made to all – including politicians who are groping in the dark. A tax should be imposed on foreclosures. Foreclosure is fast becoming a leading industry in Michigan overtaking coin-operated photo machines and baby-shoe bronzers. By imposing a foreclosure tax the authorities will be dramatically be able to increase the revenue. The tax should be imposed upon both the parties in the foreclosure combat. The party foreclosing should pay 10% of the property value and the party being subjected to it pays 50%. The last bit needs special notice. Since the borrower is facing foreclosure it is apparent that he or she cannot pay taxes. But under the new arrangement the state can consider this tax to be revenue and thus balance the budget. In future if the government’s need for expansion rises then the foreclosure tax can be simultaneously be raised. Apart from these two forms of taxes an extra 10% tax can be imposed on the final buyer. This will allow Michigan government to go on expanding irrespective of the weather.