Video: The reality of unregulated property tax lending for one Rio Grande Valley family

In the video above, Josue Lopez describes what his family’s experience dealing with the property tax lending industry over the past several years has felt like.

Josue Lopez feels like he’s climbed out of one hole only to fall into a deeper one.

For the past several years, Lopez has faced an all-too-common problem in Texas – a high-interest property tax loan, signed in desperation at the height of the recession. Thanks to a wildly unregulated lending industry, Lopez, his wife of 13 years and his three children are now stuck with a debt that could take them decades to pay off.

The family lives in Pharr, outside McAllen, and Lopez has spent almost all his life in the Lower Rio Grande Valley. His livelihood as a trucker was hit hard by the economic crisis in 2008 as diesel prices soared, drastically cutting into his income from each load. Like many families around the country, the Lopezes went into debt and fell behind on three years worth of property taxes, or around $9,000. Lopez believed that that figure also took interest into account.

Three years ago, he was ready to start paying off the debt, and planned to do so in two installments – one for $5,000, then one for $4,000 a few months later. He remembers going to the county tax office to make the first payment.

“When I got there, they said that they wanted the money right away,” Lopez recalls. “And it wasn’t just the $9,000.” His debt now stood at $21,000.

Unbeknownst to Lopez, the county appraisal district had sold his property lien to a private company that had spiked his fees into unpayable territory. And they wanted the money in just a few months, or else Lopez would default on his debt and lose his property. His family would be without a home.

The tax office referred him to a lawyer, who then referred Lopez to a few lenders in the Rio Grande Valley providing loans for property tax debt. But Lopez says the local lenders either weren’t interested in his case or demanded sky-high upfront costs, such as $5,000 immediately to assume the $21,000 debt.

“When they want to lend you money, they want to make sure they get the best deal of their life,” Lopez says.

He searched for a lender that would take on his debt and found a company in Austin. Lopez quickly filled out his application and easily moved through the process. He felt grateful, and relieved that he would be able to hold onto his home.

“Then I realized they had very, very high interest,” Lopez remembers.

While he can’t remember how much the company tried to inform him about the terms of the loans, Lopez says that, regardless, he was taken aback when he received his first request for an interest payment in the mail. But he had few other options.

“When you are in a desperate situation, you don’t want to think about [interest]. So they take advantage of all of that,” he says.

Lopez now makes a monthly payment of $400 on his loan, more than three-quarters of which goes directly toward interest. In his third year of paying the lending company, he believes he’s paid off at least $11,000. But his balance remains around $17,000 due to the interest rate.

The Lopezes are far from the only family in Texas dealing with this type of unregulated loan. Lopez says he knows plenty of others in the Rio Grande Valley stuck with the same problem.

And while the state legislature has passed minor regulations to rein in property tax lending, Texas remains only one of two states that allow homeowners to direct enter into contracts with the lending industry – contracts with few restrictions. The issue is an important topic of debate as this year’s legislative session moves forward

Lopez urges the legislature to take action, and soon.

“If they don’t act quickly, a lot of people, especially here in the Valley, are going to be affected,” he says. “Somebody’s got to look at these kinds of loans. They help people right away, because they help people rescue their properties. But in the long run, they’re going to end up paying for another property.”