Why Regulatory Expectations Are Important to Real Estate Tax Liens

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Real estate tax lien monitoring is an important service that is also somewhat complex in nature. If a bank or credit union fails to properly monitor real estate taxes, it may lead to severe regulatory consequences. As you may have guessed, there are numerous federal regulations in place that are designed to provide guidance and more for financial institutions. The FDIC and NCUA are places to make sure all banks and credit unions adhere to certain regulations in regards to the safety and soundness of deposits and all assets.

This means that all depository institutions must have a certain system in place in order to protect a consumer’s assets. In doing so, they are protecting assets from any negative implications. So, if a borrower becomes delinquent on their taxes for example, this may have a negative impact on the value of a bank or credit union’s assets, which could also have regulatory implications. Today we are going to spend some time exploring the problem with past due real estate taxes and also look at the penalties associated with failing to adhere to real estate tax lien regulations. In doing so, we hope to provide more information and insight into why it is important to do what you can in order to ensure your real estate tax liens are adequately monitored and within compliance.


The Problem With Past Due Real Estate Taxes

We have gone over why it is important to focus on real estate tax lien monitoring, so let’s now take a look at some of the issues with past due real estate taxes for the lender:

  • It can have a negative impact on the value of a given institution’s assets. When a borrower becomes delinquent on their real estate taxes, it can spell trouble for themselves and the lender. In the event a borrower cannot pay their taxes, a tax lien may be issued, which can have a negative impact on the overall value of the loan’s collateral and the institution’s assets.
  • It can affect the institution’s ability to recover any losses. When a borrower becomes delinquent, it oftentimes means that the institution will have a pretty difficult time recovering any losses associated with the loan.
  • Past due taxes may be an indicator that the borrower is having financial problems. Finally, when a borrower is having a hard time keeping up with their real estate tax payments it likely means they are experiencing some financial turmoil. In recent years lenders have become increasingly wary of who they approve for a loan, so when this happens it makes for an unhappy situation.

The best way to ensure a borrower pays his or her taxes and an institution is not stuck with a bad loan is to look into outsourcing real estate tax monitoring services. Real estate tax liens are serious business and can negatively impact an institution’s overall value and assets.

There are numerous penalties associated with failing to adhere to real estate tax lien regulations, all of which should be avoided if possible. From the institution being faced with an enforcement order to civil money penalties against both the institution and the borrower, these penalties can be quite serious. Again, this is why it is important to look into outsourcing real estate tax monitoring services. When an institution does not adequately monitor real estate taxes, it may result in serious criticism as well as internal repercussions. To learn more about this topic, please download our recent whitepaper, Real Estate Tax Monitoring and Regulatory Compliance.

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By Brian Carmody July 12, 2016 0 Comments

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