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Senior property tax deferral program reinstates reverse mortgage holders

Now that Gov. John Kitzhaber has signed House Bill 2489, it’s official: About 1,500 senior homeowners who were removed from Oregon’s Property Tax Deferral Program because they had reverse mortgages will be reinstated.

That’s a comfort for many, especially those on fixed incomes worrying over how they would find the money, not only to pay their yearly property taxes but also back taxes owed.

“I’m filled with relief,” said Lenore Bijan, a reinstated Portland homeowner with a reverse mortgage.

In 2011, Oregon Department of Revenue officials had reduced eligibility for the Senior and Disabled Property Tax Deferral Program, for one, by removing participants with reverse mortgage like Bijan and by disqualifying future applicants with reverse mortgages, because of concern that such deferral loans could not be recovered by the state.

Oregon’s Property Tax Deferral for Disabled and Senior Citizens (62 and older) represents a loan to participants at 6 percent yearly compounded interest. The state pays property taxes and puts liens on participants’ property until the homeowners leave their houses or die. Then their loans are paid back with interest, either by heirs or when the houses are sold.

In December 2011, after more than 7,000 out of 12,000 participants were dropped from the program, Bijan and senior activist David Raphael, along with others, founded the Alliance of Vulnerable Homeowners, a statewide consumer organization representing senior, disabled and other low-income homeowners in Oregon. Alliance representatives lobbied in Salem on behalf of many who, under revised deferral program rules, suddenly became ineligible for the program.

“We’re delighted, and pleased that part of our struggle is over,” Raphael said. “But there are other issues.”

Although HB 2489 now grandfathers in many of the reverse mortgage holders who got kicked off the program in 2011, it retains the policy of excluding current and future applicants with reverse mortgages. It also raises the interest from a simple 6 percent to a compounded 6 percent rate.

“That’s a big disappointment for us,” Raphael said, arguing that the interest rate is too high and that seniors who take out reverse mortgages are generally in desperate financial straits and, therefore, also need to access the tax deferral program. “We tried to get the prohibition against reverse mortgages removed, but it’s still there for new applicants.”

Despite the alliance’s efforts, the bill also doesn’t reinstate others dropped from the program, including those who had lived less than five years in their houses, those with reverse mortgages who, according to Raphael, were discouraged from reapplying when they called the department for more information, and those who didn’t respond to notices that they needed to reapply.

“Legislators have helped save the program, but they did it with a meat ax,” Raphael said, adding that even with HB 2489, enrollment in Oregon’s Property Tax Deferral Program has plummeted.

“They’ve reduced it from 12,000 in 2010 to 6,500 now, and they’re limiting new enrollees to a certain percentage, about 640 people per year,” Raphael said.

For decades the deferral program went unnoticed, until the housing crisis hit and enrollment peaked. Then it gained attention after an article in The Oregonian portrayed a program participant with an expensive home in Lake Oswego. Before, the program put no limit on the value that a home could be. New rules now require that the value of a participant’s home be limited to the median value of houses in the county where the property is located.

But, according to Raphael, The Oregonian article was misleading. “It gave the impression that wealthy people were taking advantage of the program,” he said.

Clarifying the issue of whether the deferral program was, as intended, serving low-income homeowners, a recently published Oregon State University study, commissioned by lawmakers, showed the program was accessed largely by those with poverty-level incomes. The OSU study of program participants found that half of those surveyed were living on less than $15,000 a year.

In summarizing, the OSU study, which is available online at www.ruralstudies.oregonstate.edu, concluded that the program helps many long term, low-income homeowners pay their property taxes and allows them to remain in their homes.

“My problems are solved,” Bijan said. “But there are still thousands of elders out there who are on fixed incomes and face rising property taxes, and there’s no way they can stay in their homes.”