States with Loopholes That Allow Home Equity Theft

Many states protect equity through the foreclosure process. But ten states leave open exceptions or loopholes through which government or private entities can still seize equity. There are three types of loopholes or exceptions: 1) the government allows equity to be taken for a particular public use, 2) certain types of property are left unprotected, or 3) a procedural defect in the foreclosure system allows equity to be taken under certain circumstances. 

 

 

Taken for Public Use 

Some states protect the former owner's equity value through foreclosure, but leave open the door for government entities or certain private parties to take tax delinquent property for public use. Under this loophole, the surplus due to the former owner is heavily reduced or even eliminated altogether. There should be no special treatment for tax delinquent property just because the government wants to keep it for its own ends. The Constitution requires just compensation any time someone's equity is taken for public use. 

Property Left Unprotected

In one state, residential property is protected, while other types of property are subject to equity theft. 

Procedural Defect