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STATE OF MICHIGAN IN THE SUPRE:rvtE COURT

RAF AELI, L.L.C., and ANDRE OHANESSIAN,

Plaintiffs-Appellants

V.

OAKLAND COUNTY and ANDREW MEISNER,

Defendants-Appellees.

Supreme Court No. 156849 Court of Appeals No. 330696

Oakland County Circuit Court No. 15-147429-CZ

The appeal involves a ruling that a provision of the Constitution, a statute, rule or regulation, or other State governmental action is invalid.

BRIEF OF AMICI CURIAE AARP AND AARP FOUNDATION SUPPORTING APPELLANTS AND REVERSAL

ORAL ARGUMENT REQUESTED

Daniel B. Kohrman (temporary admission pending) AARP Foundation 601 E Street, NW Washington, DC 20049 Tel: 202 434-2064 Fax:202-434-6424 dkohrman@aarp.org

Matthew E. Grenda (P73693) P.O. Box 70 Saint Charles, MI 48655 Tel.: 989-249-0350 Fax: 866-233-2630 matthewgronda@gmail.com

Counsel for Amici Curiae AARP and AARP Foundation

April24,2019

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TABLE OF CONTENTS Page

TABLE OF AUTHORITIES .......................................................................................................... ii

STATEMENT OF INTEREST ....................................................................................................... 1

INTRODUCTION AND SUMMARY OF ARGUMENT .............................................................. 2

ARGUMENT .................................................................................................................................. 6

I. TAKINGS CLAUSE PRINCIPLES LIMIT THE PROCEEDS FROM A TAX FORECLOSURE THAT GOVERNMENT MAY CLAIM-BEFORE RETURNING THE REMAINDER TO DISPOSSESSED PROPERTY OWNERS AS "JUST COMPENSATION'-TO THE SHARE NEEDED TO PAY OVERDUE TAXES AND RELATED COSTS .................................................. 6

II. OLDER HOMEOWNERS FACE A DISPROPORTIONATE RISK OF EXPERIENCING SEVERE HARM DUE TO TAX FORECLOSURES .......................... 9

A. Older homeowners face extraordinary economic pressures that make them disproportionately vulnerable to tax foreclosures ............................... 11

B. Many older people are at risk of tax foreclosures because they no longer pay their taxes into an escrow account. ..................................................... 13

C. Older homeowners are at increased risk of losing their home to a tax foreclosure because they have a significantly higher incidence of disability and associated incapacity ....................................................................... 14

CONCLUSION ............................................................................................................................. 15

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TABLE OF AUTHORITIES

Cases

Bennis v. Michigan, 516 U.S. 442 (1996) ........................................................................................................ 3, 4

Brown v. Legal Foundation of Wash., 538 U.S. 216 (2003) ........................................................................................................... 7

Coleman v. District of Columbia, 70 F. Supp.3d 58 (D.D.C. 2009) ...................................................................................... 1-2

First English Evangelical Lutheran Church of Glendale v. Los Angeles, 482 U.S. 304 (1987) ............................................................................................................ 8

Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586 (2013) .................................................................................................... 4, 6

Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982) ............................................................................................................ 7

Lucas v. S. C. Coastal Council, 505 U.S. 1003 (1992) .......................................................................................................... 7

Nelson v. City of New York, 352 U.S. 103 (1956) ............................................................................................................ 4

Olson v. United States, 292 U.S. 246 (1934) ............................................................................................................ 8

Palazzolo v. Rhode Island, 533 U.S. 606 (2001) ............................................................................................................ 2

Rafaeli v. Oakland County, No. 15-147429-CZ ("10/8/15 Op.," reproduced at Appendix (App.") at 53a) ................ 3, 6

Rafae/i v. Oakland County, No. 330696 (" 10/24/17 COA Op.," reproduced at App. 68a) .. ................................................................................................................ ... 3, 4, 6

Tahoe-Sierra Pres. Council v. Tahoe Reg 'l Planning Agency, 535 U.S. 302 (2002) ............................................................................................................ 9

United States v. 50 Acres of Land, 469 U.S. 24 (1984) .............................................................................................................. 8

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Wayside Church v. County of Van Buren, No. l:14-cv-1274, 2015 WL 13308900 (W.D. Mich. Nov. 9, 2015) .................................. 8

Wayside Church v. Van Buren Cnty., 847 F.3d 812 (6th Cir.), cert. denied, 138 S. Ct. 380 (2017) ...................................... 1, 4, 5

Webb's Fabulous Pharms. v. Beckwith, 449 U.S. 155 (1980) .............................................................................................. 5, 6, 7, 15

Williamson County Regional Planning Comm 'n v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985) ............................................................................................................ 7

Constitutional Provisions

U.S. Const., Amend. 5, Takings Clause ................................................................................. passim

Mich. Const. 1963, art. X, sec. 2 ..................................................................................................... 2

Statutes

Mich. Comp. Laws, Ch. 211 (Michigan General Property Tax Act) ...................................... 2, 3, 8

Other Authorities

William C. Apgar and Zhu Xiao Di, Housing Wealth and Retirement Savings: Enhancing Financial Security for Older Americans, Joint Ctr. for Hous. Studies at Harvard Univ., W05-8-l (Sept. 2005), http://bit.ly/20P7XaF .......................... 11

Annual Report: 2016, The State of Senior Hunger in America, Feeding Am. and Am. and Nat'l Found. To End Senior Hunger (May 2018), https://www. feeding america.org/sites/default/files/research/senior-hunger-research/ state-of-seni or-hunger-2016. pdf ........................................................................................ 12

Kermit Baker et al., Housing America's Older Adults: Meeting the Needs of an Aging Population, J. Ctr. for Hous. Stud. of Harv. Univ. (2014), http://bit.ly/ lumYrKY .................................................................................................................... 10, 11

Sudipto Banerjee, Income Composition, Income Trends, and Income Shortfalls of Older Households, Emp. Benefit Research Inst. Issue Br., No. 383 (Feb. 2013), http://bit.ly/ltYkntI ....................................................................................... 12

Debbie Gruenstein Bocian, et al., Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures, Ctr. for Responsible Lending (2011), http:// bit.ly/lq 1 Oelm ..................................................................................................................... 9

Craig Copeland, Debt of the Elderly and Near Elderly 1992-2010, 43 Emp. Benefit Research Inst. (Feb. 2013), http://bit.ly/UofvUr ............................................................... 12

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Ctr. for Disease Control, Division of Diabetes Translation, Common Eye Disorders, Nat'l Cntr for Chronic Disease Prevention and Health Promotion (Apr. 23, 2013), http://l.usa.gov/lkX2AV3 ..................................................................................... 15

Executive Summary: Spotlight on Senior Hunger 2011, Feeding Am. and Am. and Nat'l Found. To End Senior Hunger (May 2013), http://bit.ly/lqXOWjo ......................... 12

Sarah B. Mancini and Odette Williamson, Reversing Course: Stemming the Tide of Reverse Mortgage Fore closures Through Effective Servicing and Loss Mitigation, 26 Elder L.J. 85 (2018) ............................................................................. 13-14

David Marson and Charles Sabatino, Financial Capacity in an Aging Society, Generations (J. of the Am. Soc. on Aging), vol. 36, no. 2 (Summer 2012), http://bit.ly/lmoAJIL ......................................................................................................... 14

Policy Brief Protecting Senior Homeowners from Reverse Mortgage Foreclosure, Center for NYC Neighborhoods (Aug. 2017), https://s28299.pcdn.co/wp-content/uploads/2017 /08/Reverse-Mortgage-Policy-Brief-l .pdf. ..................................... 14

John Rao, The Other Foreclosure Crisis: Property Tax Lien Sales, Nat'l Consumer Law Ctr. (Jul. 2012), http://bit.ly/lMLTZMc ......................................................... 9, 10, 14

Amy Traub, In the Red: Older Americans and Credit Card Debt, AARP Pub. Pol 'y Inst. Middle Class Sec. Project 7 (Jan. 2013), http://bit.ly/1o5wCHl ............................... 12

Lori Trawinski, Nightmare on Main Street: Older Americans and the Mortgage Market Crisis, AARP Pub. Pol'y Inst. (July 2012), http://bit.ly/XLk7FC ........................ 10

U.S. Dep't ofHous. and Urban Devel., Home Equity Conversion Mortgage (HECM) Financial Assessment and Property Charge Requirements, Mortgagee Letter 2014-22 (Nov. 10, 2014), http://l.usa.gov/lMYKrnm ......................... 13

U.S. Dep't of Hous. and Urban Devel., Homeownership and Its Benefits, Urban Pol. Brief, Number 2 (1995), http://bit.ly/1AzFo2X ................................................................ 10

Brian W. Ward & Jeannine S. Schiller, Prevalence of Multiple Chronic Conditions among US Adults: Estimates from the Nat 'l Health Interview Survey, 10 Preventing Chronic Disease 1 (2013) ................................................................................ 14

Loraine A. West et al., 65+ in the United States: 2010, U.S. Census Bureau Spec. Stud. 84 (2010), http://l.usa.gov/1 WELpW7 .................................................................... 10

Odette Williamson and Jillian McLauglin, Tax Lien Sales Put Low-Income, Seniors, and the Disabled at Risk of Foreclosure, 34 Bifocal 1 (Oct. 2012), available at http://bit.ly/VFLQWP .............................................................................................. 10, 13

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Briefs

Brief on Appeal ofDefendants-Appellees Oakland County and Andrew Meisner ........................ 8

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STATEMENT OF INTEREST1

In this case it is undisputed that local Michigan taxing authorities, to collect modest

delinquent unpaid taxes, foreclosed on the owners' properties and permanently seized the

owners' equity far exceeding the tax debt and related costs. This matter is of intense interest to

amici AARP and AARP Foundation, given the disproportionate and potentially devastating

impact that such practices may have on the financial security of older homeowners in Michigan.

This is especially true for older homeowners of modest means, who, for many reasons, are most

vulnerable to tax foreclosure and can least afford to lose any hard-won equity in their homes

exceeding their tax debt.

AARP is the nation's largest nonprofit, nonpartisan organization dedicated to

empowering Americans 50 and older to choose how they live as they age. With nearly 38 million

members and offices in every state, the District of Columbia, Puerto Rico, and the U.S. Virgin

Islands, AARP works to strengthen communities and advocate for what matters most to families,

with a focus on financial stability, health security, and personal fulfillment. AARP's charitable

affiliate, AARP Foundation, works to end senior poverty by helping vulnerable older adults build

economic opportunity and social connectedness.

AARP and AARP Foundation, through participation as amici curiae in state and federal

courts, seek to protect older Americans' economic security, including their access to home equity

pursuant to guarantees established by state and federal constitutional law.2 This case presents a

This brief was not authored in whole or in part by any party or its counsel, and no person other than AARP, its members, AARP Foundation, or its counsel contributed any money intended to fund the preparation and submission of this brief.

2 AARP and AARP Foundation previously filed briefs as amici curiae challenging on constitutional grounds the same state tax foreclosure statute at issue in this case. See Wayside Church v. Van Buren Cnty., 847 F.3d 812 (6th Cir.), cert. denied, 138 S. Ct. 380 (2017). AARP and AARP Foundation also appeared as amici curiae in Coleman v. District of Columbia, 70 F.

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fundamental issue: whether public taxing authorities, notwithstanding the Takings Clauses of the

United States and the Michigan Constitutions,3 may confiscate, without "just compensation," the

full value of property on which taxes are owed in order to satisfy such delinquent tax obligations.

AARP and AARP Foundation respectfully submit that their views on this legal issue, and the

dire implications for older property owners of such tax foreclosure practices, may be of

assistance to this Court in its deliberations.

INTRODUCTION AND SUMMARY OF ARGUMENT

In this case Oakland County sold plaintiffs-appellants' properties at public auction and

deposited the entire amount of the proceeds into County accounts, including funds exceeding the

sums needed to pay all overdue taxes, fees, and other related costs. In Rafaeli 's case, the County

retained over $24,000 in surplus equity to collect a tax debt of $8.41; in Ohanessian's case, tax

officials seized $76,000 in surplus equity. Rafaeli and Ohanessian claim that the County's failure

to return to them these surplus proceeds violates the Takings Clause of the Fifth Amendment to

the United States Constitution and corresponding text in Article X, Section 2 of the Michigan

Constitution of 1963. See Palazzolo v. Rhode Island, 533 U.S. 606,617 (2001) ("The Takings

Clause of the Fifth Amendment ... prohibits the government from taking private property for

public use without just compensation.").

The lower courts dismissed the plaintiffs-appellants' claims, holding that there were no

takings because the Michigan General Property Tax Act4 extinguished any interest that Rafaeli

Supp.3d 58 (D.D.C. 2009) (denying motion to dismiss Takings Clause challenge to D.C. tax foreclosure law confiscating surplus equity above value needed to cover unpaid taxes).

3

4

See U.S. Const., Amend. 5; Mich. Const. 1963, art. X, sec. 2.

Mich. Comp. Laws ("hereafter "MCL"), Ch. 211.

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and Ohanessian had in their properties prior to their sale. As a result, the courts below found, any

surplus proceeds from the sales belonged to the County, not the former owners.5

In particular, the Circuit Court found that under Michigan law "[property] delinquent for

taxes for the immediate preceding 12 months of more is forfeited to the county treasurer" and

where that has occurred, as here, such "[p ]roperty properly forfeited pursuant to state law and in

accordance with due process is not subject to a Takings claim."6 The Court of Appeals affirmed,

albeit on very different grounds. A two judge majority declared the County's actions justified by

U.S. Supreme Court precedent in Bennis v. Michigan, 516 U.S. 442 (1996), upholding the

State's forfeiture, as a public nuisance, of a car jointly owned by a husband and wife, "with no

offset for [the wife's] interest," because the husband had engaged in criminal activity in the

vehicle.7 Likewise, the appeals court stated, "[d]efendants [here] obtained [plaintiffs'] property

by way of a statutory scheme that did not violate due process," and, so, "[t]he constitution does

not require them to compensate for the lawfully-obtained property. "8 Judge Shapiro, concurring,

criticized the majority's reliance on Bennis as "erroneous[]" and "unsound," reasoned "that this

case bears little, if any, relation to Bennis," and, finally, declared "it is a mistake to conclude that

5 The Oakland County Circuit Court, Rafaeli v. Oakland County, No. 15-147429-CZ (hereafter "10/8/15 Op.," reproduced at Appendix (App.") at 53a), held that under the Michigan General Property Tax Act, "Plaintiffs did not have a property interest in the excess proceeds received in the tax sale [ of their properties on which the County had foreclosed] because full forfeiture had already occurred." 10/8/15 Op., App. 55a. The Michigan Court of Appeals, Rafaeli v. Oakland County, No. 330696 (hereafter "10/24/17 COA Op.") affirmed on other grounds. App. 61a.

6 10/8/15 Op. at 3, App. 55a.

7 10/24/17 COA Op. (Majority Opinion) at 5, App. 65a (quoting Bennis v. Michigan, 516 U.S. at 452).

8 Id.

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Bennis addresses, let alone controls, the issues in this case." 9 Although Judge Shapiro said other

precedent justified the County's conduct, he added, notably, that "plaintiffs' claims call out for

relief." 10

The Court of Appeals' decision should be reversed. While taxing authorities have a

legitimate interest in collecting delinquent taxes, the Takings Clause prevents them from

confiscating private property for a public purpose "without just compensation." This includes

taking equity in real property, for the public purpose of extinguishing tax delinquencies, by

foreclosing on properties without returning to former owners the value of such properties in

excess of the amount required to cover delinquent taxes.

Decisions of the U.S. Supreme Court indicate that private property owners, including

those subject to tax foreclosure, have a strong basis to expect that surplus equity, following

deduction of taxes and foreclosure expenses owed, will be returned to them. See, e.g., Koontz v.

St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2600 (2013) ("[w]hen the government

commands the relinquishment of funds linked to a specific, identifiable property interest such as

a ... parcel of real property, a 'per se [takings] approach' is the proper mode of analysis .... ").

9 10/24/17 COA Op. (Concurring Opinion) at 1, 2, App. 68a (citing Nelson v. City of New York, 352 U.S. 103 (1956), approving New York City foreclosures for delinquent taxes and retention of foreclosure sales proceeds in light of a record of "adequate steps ... to notify the owners of the charges due and the foreclosure proceedings."). Plaintiffs-Appellants address the serious flaws in the Court of Appeals majority's reliance on Bennis as well as Judge Shapiro's reliance on Nelson. Accordingly, amici AARP and AARP Foundation decline to cover this same ground.

10 10/24/17 COA Op. at 2, App. 68a. Further, Judge Shapiro also noted that Judge Kethledge, in dissent from a decision dismissing a case similar to this one on jurisdictional grounds, likewise lamented that denying property owners access to surplus value of their real estate foreclosed on and sold by the State is a "gross injustice-both equitably and from the standpoint of the interests protected by takings law .... " 10/24/17 COA Op. at 3, App. 69a (quoting Wayside Church v. Van Buren County, 847 F.3d at 823).

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The state cannot confiscate the whole value of property being taken to satisfy delinquent taxes

simply by declaring that the interest of the delinquent taxpayer is forfeit. See, e.g., Webb's

Fabulous Pharms. v. Beckwith, 449 U.S. 155, 164 (1980).

A decision by this Court that Rafaeli and Ohanessian may be deprived of the entire equity

in their properties simply because they did not pay a relatively small amount of delinquent

property taxes would let stand a "gross injustice." Wayside Church, 847 F.3d at 823 (Kethledge,

J., dissenting). In many cases such windfalls to the County will be at the expense of its most

economically vulnerable citizens. Older persons are disproportionately at risk of losing their

homes and their equity to tax foreclosures due to combination of factors that make it increasingly

difficult for many older people to manage their finances. These include limited and declining ( or

at best fixed) incomes, rising healthcare and housing (and other) costs, a growing incidence of

disabling health conditions, including cognitive decline or dementia, as well as other challenges,

such as no longer having a bank-managed escrow account (because owners no longer carry a

mortgage).

This Court should recognize that vulnerable property owners like Ohanessian and

Rafaeli, as well as older homeowners generally, have a vital property interest in their surplus

equity. Moreover, the Court should rule that these concerns support legal precedents favoring

protection of this fundamental property interest by the Takings Clauses of the U.S. and State

Constitutions. Hence, the Court should reverse and remand this case to the State Circuit Court.

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ARGUMENT

I. TAKINGS CLAUSE PRINCIPLES LIMIT THE PROCEEDS FROM A TAX FORECLOSURE THAT GOVERNMENT MAY CLAIM-BEFORE RETURNING THE REMAINDER TO DISPOSSESSED PROPERTY OWNERS AS "JUST COMPENSATION"-TO THE SHARE NEEDED TO PAY OVERDUE TAXES AND RELATED COSTS.

The lower courts' analyses and the County's argument to this Court rest on a remarkable

proposition: that a state taxing authority can avoid a "taking"-and its corresponding duty to

provide "just compensation"-by simply declaring that, by the time of a tax sale, the owner's

interest already has been extinguished and, thus, there is no property to "take."11 This

interpretation of Takings Clause jurisprudence is seriously flawed and the Court of Appeals'

ruling should be reversed.

A preliminary question is whether constitutional Takings Clause principles apply where

the property owner has under-paid property taxes-a civil statute matter-and the state, in

response, has seized surplus equity far exceeding the tax debt and costs. Amici respectfully

submit that the Takings Clause should, and under established jurisprudence does, have clear

application in this instance. It is well-established that the Fifth Amendment "stands as a shield

against the arbitrary use of governmental power." Webb's Fabulous Pharms. v. Beckwith, 449

U.S. 155, 164 (1980).

In general, depriving a private property owner of their property interest for a public

purpose is a takingper se. See Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586,

11 This common error infects both the Circuit Court's conclusion that "[p ]roperty properly forfeited pursuant to state law and in accordance with due process is not subject to a Takings claim," 10/8/15 Op. at 3, App. 55a, as well as Judge Shapiro's concurring opinion on appeal, that the County's "retention of the foreclosure sales proceeds" was permissible so long as "the record shows adequate steps ... to notify the owners of the charges due and the foreclosure proceedings." 10/24/17 COA Op. at 2, App. 68a.

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2600 (2013) (quoting Brown v. Legal Foundation of Wash., 538 U.S. 216,235 (2003)) (finding

that "[w]hen the government commands the relinquishment of funds linked to a specific,

identifiable property interest such as a bank account or parcel of real property, a 'per se [takings]

approach' is the proper mode of analysis under the Court's precedent."); Loretto v. Teleprompter

Manhattan CATV Corp., 458 U.S. 419,430,436 (1982) (holding that the government's taking

physical control over a property interest for public use is a takingper se).

To be sure, the Takings Clause "does not proscribe the taking of property; it proscribes

taking without just compensation." Williamson County Regional Planning Comm 'n v. Hamilton

Bank of Johnson City, 473 U.S. 172, 194 (1985). Yet, the effect of the Circuit Court's ruling and

of Judge Shapiro's concurring opinion on appeal is that the right to just compensation evaporates

once a property owner is divested of a property interest. That cannot be the law.

The state in this case has confiscated surplus value wholly unrelated to the "public

purpose" for which foreclosure is carried out, simply by declaring that the interest of the

delinquent taxpayer is forfeit. The State of Michigan may not "by ipse dixif' secure such a

windfall for itself. Webb's Fabulous Pharmacies, Inc., 449 U.S. at 164 (holding that the State of

Florida could not "transform private property into public property without compensation, even

for the limited duration of [a required] deposit [of private funds] in court" by "recharacterizing

the [private] principal [required to be deposited in court] as 'public money' because it is held

temporarily by the court."). Here, as in Webb's, the State's attempt to "transform private property

into public property without compensation" is "the very kind of thing that the Takings Clause of

the Fifth Amendment was meant to prevent." Id. See also Lucas v. S. C. Coastal Council, 505

U.S. 1003, 1014 (1992) ("[T]he government's power to redefine [property rights is] necessarily

constrained by constitutional limits.").

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Among the arguments advanced by the County is that the district court in Wayside

Church v. County of Van Buren, No. l:14-cv-1274, 2015 WL 13308900, (W.D. Mich. Nov. 9,

2015), "got it exactly right in rejecting the plaintiffs takings claims" in finding that "[u]nder the

General Property Tax Act, [Van Buren] [C]ounty 'ha[d] legal title to the [plaintiffs] land at the

time of the [tax foreclosure] sale"' and, thus, any "surplus money produced" in the sale

"belonged to the county, not the property owners." Brief on Appeal ofDefendants-Appellees

Oakland County and Andrew Meisner at 17-18 & n. l (quoting Wayside Church, 2015 WL

13308900 at *6, 8). This analysis emphasizes the dispossessed property owner's supposed lack

of a property interest at the time of the tax sale when, instead, a proper Takings Clause analysis

should focus on government actions that dispossessed the property owner whenever they

occurred, and whether such actions effectuated a taking and triggered a corresponding duty to

provide "just compensation." Here it was the foreclosure itself, not the sale of foreclosed

property, that effectuated the taking and triggered a duty to restore surplus equity.

By improperly focusing on the timing of the sales of plaintiffs-appellants' properties as

the relevant trigger of a duty to restore to Rafaeli and Ohanessian their surplus equity, the

County ignores the fundamental mandate of the Takings Clause, which "places a condition on

the [government's] exercise of' the power to take private property in the first instance. First

English Evangelical Lutheran Church of Glendale v. Los Angeles, 482 U.S. 304, 314 (1987).

Michigan's statutory enactment that purports to eliminate a private owner's property interest in

the surplus equity upon a tax foreclosure should be subject to these conditions as well.

"The Court has repeatedly held that just compensation normally is to be measured by 'the

market value of the property at the time of the taking."' United States v. 50 Acres of Land, 469

U.S. 24, 29 (1984) (quoting Olson v. United States, 292 U.S. 246, 255 (1934)). Indeed, the

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Supreme Court has recognized, at least implicitly, that a "former owner" may retain a protected

property interest subject to the Takings Clause. That is, "[w]hen the government physically takes

possession of an interest in property for some public purpose, it has a categorical duty to

compensate theformer owner . .. " Tahoe-Sierra Pres. Council v. Tahoe Reg'/ Planning Agency,

535 U.S. 302, 322 (2002) (citation omitted) (emphasis added).

The lower courts' rulings that Rafaeli and Ohanessian do not state a claim for just

compensation pursuant to the Fifth Amendment cannot be squared with Takings Clause

jurisprudence. This Court should reverse and remand for a proper constitutional analysis.

II. OLDER HOMEOWNERS FACE A DISPROPORTIONATE RISK OF EXPERIENCING SEVERE HARM DUE TO TAX FORECLOSURES.

The recent economic crisis that caused millions of mortgage foreclosures also triggered a

nationwide increase in home (and other property) foreclosures due to unpaid taxes. See John

Rao, The Other Foreclosure Crisis: Property Tax Lien Sales, Nat'l Consumer Law Ctr. at 10-11

(Jul. 2012) (hereafter "The Other Foreclosure Crisis"), http://bit.ly/lMLTZMc. Foreclosures

have lowered property values and tax revenues, negatively affecting both homeowners and their

communities. See Debbie Gruenstein Bocian, et al., Lost Ground, 2011: Disparities in Mortgage

Lending and Foreclosures 7, Ctr. for Responsible Lending (2011), http://bit.ly/lqlOelm. Many

homeowners, while facing continuing effects of a sputtering economy, a difficult job market,

stagnant (at worse) home values, also must contend with rising property taxes as "[l]ocal

governments face financial pressures that necessitate a steady stream of tax revenue." The Other

Foreclosure Crisis, supra at 5. "Homeowners who are unable pay their mortgages are likewise

struggling to keep up with payments on home property taxes," and "local governments have

sought to bridge these budget gaps by instituting more aggressive tax collection practices." Id. at

10-11.

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Older people are at particular risk of losing their homes to tax foreclosures for various

reasons. These include fixed incomes, rising costs, increased incidence of disability, and having

no escrow account to cover property taxes (because owners have no mortgage payment, or have

a subprime or reverse mortgage). The Other Foreclosure Crisis at 5, 8-10; see also Odette

Williamson and Jillian McLauglin, Tax Lien Sales Put Low-Income, Seniors, and the Disabled at

Risk of Foreclosure, 34 Bifocal 1 (Oct. 2012), available at https://bit.ly/2VgQhtJ (hereafter "Tax

Lien Sales").

Meanwhile, homeownership is considered the lynchpin of well-being for older

Americans. Kermit Baker et al., Housing America's Older Adults: Meeting the Needs of an

Aging Population, J. Ctr. for Hous. Stud. of Harv. Univ. 1 (2014) (hereafter Housing America's

Older Adults), http://bit.ly/lumYrKY. As of 2009, approximately 18.5 million [80 percent] of

the 23 .1 million householders over age 65 owned their homes. Loraine A. West et al., 65 + in the

United States: 2010, U.S. Census Bureau Spec. Stud. 84 (2010), http://l.usa.gov/1WELpW7.

"Older Americans often use[ ] their home equity in retirement to finance health care, home

maintenance, and other large expenses and as a safety net that could be used to meet unexpected

needs." Lori Trawinski, Nightmare on Main Street: Older Americans and the Mortgage Market

Crisis, AARP Pub. Pol'y Inst. 3 (July 2012), http://bit.ly/XLk7FC. "For most older people, the

home is ... their most valuable asset." Id.

Michigan's tax foreclosure law is the antithesis oflongstanding policies encouraging

homeownership because it provides stability, builds wealth for families and communities, and

spurs economic growth. See U.S. Dep't ofHous. and Urban Devel., Homeownership and Its

Benefits, Urban Pol. Brief, Number 2 (1995), http://bit.ly/1AzFo2X.

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A. Older homeowners face extraordinary economic pressures that make them disproportionately vulnerable to tax foreclosures.

Rising costs and low income play a significant role in making many older people

extremely vulnerable to losing their homes through tax foreclosures. See William C. Apgar and

Zhu Xiao Di, Housing Wealth and Retirement Savings: Enhancing Financial Security for Older

Americans, Joint Ctr. for Hous. Studies at Harvard Univ., W05-8-l 16 (Sept. 2005), http://bit.ly/

20P7XaF; Kermit Baker, et al., Housing America's Older Adults at 16 (describing housing as the

lynchpin of well-being: "As the single largest item in most household budgets, housing costs

directly affect day-to-day financial security as well as the ability to accrue wealth to draw upon

later in life."). Even older people who own their homes outright have significant housing related

costs, including taxes, utilities, insurance, and repairs and maintenance. See Housing Wealth and

Retirement Savings: Enhancing Financial Security for Older Americans at 16. Such costs often

are unaffordable for older people who no longer work and have limited retirement income. Id.

Among the 20 percent lowest income, age 65+ seniors, 5.1 million own their homes free and

clear of any debt. Id. Yet, one in four of these homeowners pays 50 percent or more of their

income for housing costs, including taxes and utilities. Id. An even greater share of lower income

homeowners still paying off mortgage debt devote a majority of their income to housing-related

costs. Id.

Older Americans often are considered resistant to incurring debt due to conservative

attitudes toward spending. However, economic challenges for persons age 50+ have made debt a

more compelling option. Among the reasons older persons are especially likely to incur

consumer debt as home repairs. 12 Older persons also are more likely to take on debt to aid or pay

12 Amy Traub, In the Red: Older Americans and Credit Card Debt, AARP Pub. Pol 'y Inst. Middle Class Sec. Project 7 (Jan. 2013), http://bit.ly/lo5wCHl.

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the debts of a family member, thereby making them all the more vulnerable in adverse economic

conditions. As basic expenses such as housing, utilities, prescription drugs, and health care

continue to rise, 13 many people now enter their retirement years incurring costs for basic needs

that exceed their modest or limited incomes. See, e.g., Sudipto Banerjee, Income Composition,

Income Trends, and Income Shortfalls of Older Households, Emp. Benefit Research Inst. Issue

Br., No. 383, 13, 14 (Feb. 2013), https://bit.ly/21yUa7F. Approximately two-fifths of families

that include a person over age 65 have an income shortfall. See id. at 13.

Economic security is particularly tenuous for older people in the lowest income brackets,

who suffer hunger or food insecurity due to income shortfalls. "In 2011, almost one in every 12

people above the age of 60 in the United States was food insecure. That represents 4.8 million

seniors nationwide, which is more than double the number of food insecure seniors in 2001."

Executive Summary: Spotlight on Senior Hunger 2011, Feeding Am. and Am. and Nat'l Found.

To End Senior Hunger (May 2013), https://bit.ly/2DsBlyN. 14 It is unsurprising that many older

homeowners struggling with chronic income shortfalls have difficulty keeping up with their

taxes.

13 Id.

14 Five years later the data on senior hunger had barely changed. Annual Report: 2016, The State of Senior Hunger in America, Feeding Am. and Am. and Nat'l Found. To End Senior Hunger 3-4 (May 2018), https://www.feedingamerica.org/sites/default/files/research/senior­hunger-research/state-of-senior-hunger-2016. pdf ( 4. 9 million persons age 60 and above were "food insecure").

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B. Many older people are at risk of tax foreclosures because they no longer pay their taxes into an escrow account.

For many people with a mortgage, a portion of their property taxes are collected with

their monthly payment and held in an escrow account until the taxes are due. At that time, the

mortgage servicer pays taxes directly to the taxing authority. Ironically, paying off one's

mortgage-a potential sign of greater economic security-often plays a significant role in greater

vulnerability to tax delinquency and tax foreclosure. See Tax Lien Sales. Upon paying off a

mortgage, homeowners assume responsibility for setting aside sufficient funds to pay taxes when

they come due and for making payment themselves. This adjustment can create significant

problems for older homeowners, particularly for those who have difficulty with financial

decision making or have diminished capacity or disabilities. They may not understand the

process, inadvertently miss payment dates, or be unable to set aside sufficient funds to pay tax

bills when required. Id.

Similarly, homeowners who have reverse or subprime mortgage loans face challenges

paying their taxes. Reverse mortgages, a product largely serving older homeowners, generally do

not feature escrow accounts for taxes. Hence, as with older homeowners who no longer make

mortgage payments, those with reverse mortgages must manage tax (and insurance) payments on

their own. 15 "[ A] lack of understanding that they were required to pay these charges" was "the

15 Reverse mortgages insured through the Home Equity Conversion Mortgage (HECM) Program permit borrowers 62 years or older to obtain a lump sum or line of credit based on the value of their home. They are not required to make payments on the reverse mortgage while they continue to live in the home, but they must carry hazard insurance and make tax payments. Reverse mortgage servicers are required to protect the security for the mortgage by paying property tax on the borrower's behalf if taxes becomes delinquent. This shifts to the borrower the risk of foreclosure, as HUD requires the servicer to declare the mortgage due and payable if the borrower does not repay property taxes advanced. See U.S. Dep't ofHous. and Urban Devel., Home Equity Conversion Mortgage (HECM) Financial Assessment and Property Charge Requirements, Mortgagee Letter 2014-22 (Nov. 10, 2014),http://l.usa.gov/lMYKmm.

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most significant factor" for the recent surge in (mostly older) reverse mortgage borrowers

"losing their homes to foreclosure." Sarah B. Mancini and Odette Williamson, Reversing

Course: Stemming the Tide of Reverse Mortgage Foreclosures Through Effective Servicing and

Loss Mitigation, 26 Elder L.J. 85, 102 (2018) (citing 2012 Report to Congress by the Consumer

Financial Protection Bureau). 16 In addition, "the vast majority of subprime mortgage loans made

prior to 2008 did not include an escrow account"; indeed, "[s]ome lenders used the lower

monthly loan payment to induce consumers into believing the loans were affordable." The Other

Foreclosure Crisis, supra at 5.

C. Older homeowners are at increased risk of losing their home to a tax foreclosure because they have a significantly higher incidence of disability and associated incapacity.

"Homeowners most at risk [ of losing their homes to tax foreclosure] are those who have

fallen into default because they are incapable of handling their financial affairs, such as

individuals suffering from Alzheimer's, dementia, or other cognitive disorders." The Other

Foreclosure Crisis, supra at 5. The risk of having such disorders increases exponentially with

advancing age. See David Marson and Charles Sabatino, Financial Capacity in an Aging Society,

Generations (J. of the Am. Soc. on Aging), vol. 36, no. 2 (Summer 2012), http://bit.ly/lmoAJIL;

see also Brian W. Ward & Jeannine S. Schiller, Prevalence ojMultiple Chronic Conditions

among US Adults: Estimates from the Nat 'l Health Interview Sun,ey, 10 Preventing Chronic

Disease 1, 5 (2013 ).

16 In November 2016 HUD reported nearly 90,000 reverse mortgage in default on property charges, mostly consisting of tax or insurance shortfalls. Id.; see also Policy Brief Protecting Senior Homeowners from Reverse Mortgage Foreclosure, Center for NYC Neighborhoods 2 (Aug. 2017) (reporting that "[n]ationwide, reverse mortgage defaults from taxes and insurance doubled from 2015 to 2016"), available at https://s28299.pcdn.co/wp-content/uploads/2017/ 08/Reverse-Mortgage-Policy-Brief-l. pdf.

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Older people also are at risk of foreclosure because government notices frequently use

small font sizes that some persons have difficulty reading and also because of legalistic or

archaic language in such notices that is difficult to understand. Vision impairments generally,

and especially severe conditions such as cataracts and macular degeneration, are

disproportionately prevalent in older people. Ctr. for Disease Control, Division of Diabetes

Translation, Common Eye Disorders, Nat' l Cntr for Chronic Disease Prevention and Health

Promotion (Apr. 23, 2013), https://www.cdc.gov/visionhealth/basics/ced/index.html.

The factors that make older people particularly vulnerable to becoming delinquent on

their taxes also make them least able to save their homes and avoid the devastating loss of their

equity. Some will be forced into nursing homes prematurely, and others may be forced to rely on

government benefits. The Fifth Amendment Takings Clause was designed to prevent such

"arbitrary use of governmental power." Webb's Fabulous ?harms. 449 U.S. at 164.

CONCLUSION

For the reasons set forth above, amici curiae AARP and AARP Foundation urge the

Court to reverse the decision of the Court of Appeals.

Daniel B. Kohrman (temporary admission pending) AARP Foundation 601 E Street, NW Washington, DC 20049 Tel: 202 434-2064 Fax: 202-434-6424 dkohrman@aarp.org

Fax: 866-233-2630 matthewgronda@gmail .com

Counsel for Amici Curiae AARP and AARP Foundation

Apri\24, 2019

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