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84 MICHIGAN What Is Tax Title? Why Is Tax Title Relevant to Default Servicing? By: Tobias J. Lipski "Tax title" refers to the quality of real estate title, which follows the county treasurer's foreclosure for nonpayment of real estate taxes. Michigan title insurers will not insure tax title, unless the holder of the tax title successfully takes additional steps that provide additional assurances to the title insurer. Tax title is most often relevant to servicers in instances where a mortgage secures either the wrong property or fails to secure all parcels the originating lender intended to serve as security for the mortgage loan. It often follows that if the mortgage erroneously omits a parcel, the servicer is not monitoring payment of taxes on the omitted parcel. Accordingly, taxes may become delinquent on the omitted parcel and the parcel is lost to the county treasurer's foreclosure. With some luck, and if it makes financial sense to do so, a servicer may be able to acquire the property at the treasurer's public auction, or, as the case may be, from a party who already acquired the property from the county. Unfortunately, as stated above, tax title is not insurable without additional action. Michigan title insurers believe the risk of a taxpayer, or lien holder, subsequently challenging foreclosure is too great to insure as is—although few cases have, in fact, succeeded. e Michigan's General Property Tax Act (GPTA) requires that the county treasurer process a variety of notices and legal filings. e court manages all foreclosures for a given county, with some exception, via a single case. Arguably, the level of scrutiny the court applies to its review of the quality of the notices, and the accuracy of the parties to whom notice is sent, is low. In the case of Wayne County Treasurer v. Perfecting Church, 478 Mich 1 (2007), the Michigan Supreme Court held that the county treasurer failed to afford a taxpayer due process of law by failing to comply with the GPTA's notice provisions. Consequently, notwithstanding entry of a judgment of foreclosure against a given property, if the county failed to fully process the statutory notices, the judgment may be subject to challenge and set aside several years later. As to what additional action the owner of tax title must take to acquire title insurance, Michigan title insurers have different requirements, and those requirements may depend on the existence of any pending lawsuits between a taxpayer, or class of taxpayers, and a county treasurer. All title insurers will accept a quiet title judgment, resulting from a quiet title action properly served upon all parties who the county treasurer was required to serve (interested parties). Title insurers vary as to what the tax title owner must furnish other than the judgment (e.g. proofs of service). All title insurers will accept documentation signed by an interested party either releasing its interest of record or conveying its interest to the tax title owner (i.e. quit-claim deed; release of lien). Some title insurers will accept evidence that the county treasurer provided actual notice (to all interested parties) of the show cause/ foreclosure hearing. Specifically, the owner of tax title must obtain, for example, a copy of an affidavit of personal service or the signature of the interested party on a certified mailing. In order to obtain such proof, the tax title owner must rely on the county having such records. Moreover, many counties will not release these records, unless the tax title owner submits a formal request, pursuant to the Freedom of Information Act. Overall, as it concerns those instances where a servicer might elect to acquire tax title to remediate a defect in its mortgage, servicers should be aware of the additional steps necessary to secure an insurable interest in tax title. Acquiring tax title is a two step process: 1) acquire it and 2) make it insurable. Tobias J. Lipski is Schneiderman & Sherman, P.C.'s (SSPC) general counsel and senior title attorney. Lipski joined SSPC in 2006. Lipski provides compliance and title defect solutions to creditors and real estate investors. OHIO Cleveland, Detroit Top Rental Investment Markets Rental property investors take note: Cleveland, Detroit, and Dayton, Ohio, offer the highest return when it comes to single- family homes, according to a recent report from RentRange. In a report released March 30, Rent- Range identified the 25 U.S. markets with the highest average gross yield on single- family rental properties. According to the data, many of the nation's most lucrative markets are in "noncoastal, Midwestern states, such as Ohio, Missouri, and Kansas." Topping the list was the Cleveland- Elyria-Mentor, Ohio, market, which offered a Q 4 2016 average gross yield of 13.7 percent. Following close behind was Detroit-War- ren-Livonia, Michigan, with a 13.5 percent yield, and Dayton, Ohio, with a 13.1 percent yield. Memphis, Tennessee, and Toledo, Ohio, finished out the top five. "Looking at average gross yield rates, Cleveland, Detroit, and Dayton top our list of markets with the highest returns for single-family homes," said Dennis Cisterna, Chief Revenue Officer at RentRange. "ese three markets fall within the Rust Belt region, which was once dominated by an industrial-powered economy and is now experiencing population loss and economic decline." But just because these markets top the list, Cisterna said, that doesn't mean they're automatically great investments. "For investors," he said, "whether you are an everyday investor or an institutional investor, it is vital to analyze each prop- erty to determine whether it will produce the returns you expect prior to purchas- ing a single-family residential investment property." is can certainly be said for Detroit, which may not present high yields for much longer. "While Detroit is ranked at No. 2," the report stated, "yields have declined from a year ago, perhaps due to recent economic improvements. If economic conditions continue to improve, yields may continue to fall as a result of a potential rise in home prices." Other metros to make RentRange's top 25 list included Milwaukee, Wisconsin; Birmingham, Alabama; Indianapolis, In- diana; Canton, Columbus, and Cincinnati, Ohio; Tulsa and Oklahoma City, Oklaho- ma; Columbia, South Carolina; Houston, McAllen, and Dallas, Texas; Wichita and Kansas City, Kansas; St. Louis, Missouri; Pittsburgh and Philadelphia, Pennsylvania; Chicago, Illinois; Greensboro, North Caro- lina; and Omaha, Nebraska. RentRange provides market data and analytics for the single-family rental industry.

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