New Path To Foreclosure -- Delinquent Water Bills

The city has threatened to turn the water bill debts of 7,045 New York properties over to a collections agent powerful enough to usurp their property titles. And if misery loves company, those debtors can rejoice. At a Thursday City Council hearing, the Department of Environmental Protection (DEP) suggested amending the law to add thousands more to the debtors' sad ranks.

DEP Commissioner Cas Holloway testified there that the high-stakes debt collection practice should be applicable not just to the property types covered by current law—multi-family homes, small stores or offices with no more than two apartments attached, and vacant residential land—but also to the 8,500 single family homes whose water bills are also seriously delinquent, meaning at least $1,000 has been overdue for more than a year.

Currently, the department sanctions late-paying single family homes by shutting off their service, a process that requires several man-hours of work, including excavation and other steps, that cost the city on average $3,100 per disconnection.

"If the 8,500 single-family homes were instead eligible for the lien sale, we would expect to collect $25 million with virtually no operational expense," Holloway testified, according to a prepared statement. When DEP sells a lien, a company buys the debt and becomes the collections agent. "It is difficult to think of a more efficient way to lighten the burden on the ratepayers and increase service in the field."

What's At Stake?
Holloway's proposal ironically came during a hearing called to take testimony about a Council bill that would restrict—rather than augment—DEP authority's to subject certain debtors to a lien sale, and DEP's proposal stood in marked contrast to some of the advocates who testified at the hearing.

Selling liens could eventually lead to foreclosures, advocates noted. "We do have many stories of people who are losing their homes," testified Judith Goldiner, an attorney with The Legal Aid Society. Unpaid water liens do not appear to have stripped any property owners of their titles yet. But heavy water bill debts are making some homeowners vulnerable to foreclosure even before high stakes debt collection begins, advocates testified.

An elderly woman whose monthly mortgage payments had suddenly increased from $1,200 to $1,700 learned that her bank was charging her an extra $500 per month because it wanted to recoup the money it had paid to resolve her delinquent water bill, according to Stephan Dookeeram, a foreclosure counselor at Pratt Area Community Council, where the woman turned for help.

The woman had owed DEP $3,000. Her banks' payoff helped her avoid a lien sale, but because she can't afford the resulting higher mortgage payments, she's fallen behind, Dookeeram said. "She went from being current to, all of a sudden, having a past-due mortgage," he testified.

Some property owners with water liens are also in default on their mortgages and must decide which bills to pay in an effort to keep their homes—the mortgage or the water. Complicating the problem for delinquent homeowners is the fact that banks don't like to modify mortgages—a process that helps homeowners who have fallen behind—if there are liens on the property. "A $3,000, $4,000 or $5,000 water lien can stop the modifications process dead in its tracks," testified Michael Hickey, executive director of the Center for NYC Neighborhoods.

DEP's high stakes debt collection practice also drew fire from Councilman Dominic Recchia."That's pretty disturbing that you can't tell me how many senior citizens are on the lien sale list," Recchia said, after learning that DEP keeps no age data on its customers.