There are many homeowners in recent years who have lost their homes through foreclosure when they've fallen behind on their mortgage payments, or because of federal tax liens over significant amounts of income tax owed to the IRS. In what some are calling a second foreclosure crisis, some homeowners are losing their residences because of tiny state or local tax debts, sometimes amounting only to a few hundred dollars.
Many states have antiquated laws that provide for state or local government to quickly collect overdue property taxes or even more minor fees for sewer and water services by selling investors' tax liens on a homeowner's property. These investors, after paying the amount owed to the state or local government, then have a claim on the home. The homeowner is expected to pay interest on the debt to the investor. If they neglect to pay the interest or the principal owed, the investor in some cases can ultimately foreclose on the property and take possession of it.