Foreclosure Even When You Pay Your Mortgage: Usually, when someone gets foreclosed upon, it is due to nonpayment on a mortgage or line of credit on the house. However, there are other, less well known circumstances that can lead to foreclosure that you ought to know about. These fall generally into the classification of "tax liens", and result from nonpayment of a tax or tax-based bill on the property. If you don't pay your property tax, it could be sold at foreclosure. What gets really surprising is that in some towns and counties, utility or other similar services are provided by the municipality and billed accordingly. If the homeowner doesn't pay, they are sold at foreclosure as unpaid tax liens, often for very small amounts of money. In one case in New Jersey, a man lost his home over a $140 water bill that wasn't paid on time. An investor bought the home at foreclosure for the $140, and then, after negotiations, resold it to the original owner for about $37,000. Nice profit, huh? Because of the cash shortages that many cities and towns now face, this is becoming an increasingly common practice. The city needing cash sells the lien to an investor, who then forecloses on the home. In another equally ridiculous, but very legal, case, a Washington, DC owner found his home being foreclosed over an allegedly delinquent property tax bill. It seems the city had erroneously removed a homestead tax exemption, resulting in an increased tax bill. He was not aware of the change as the removal of the exemption was erroneous and continued to pay what he thought was his correct property tax when due. The home was foreclosed by the purchaser of the tax lien, and the owner has had to hire an attorney and sue to reverse the tax sale and get his home back. Results still pending, but, as he notes, he did nothing wrong. The city erroneously revoked the exemption about 6 years ago, and has acknowledged the error by restoring it subsequently. So, the word here is keep just as close watch on your tax obligations and municipally provided services as you would your mortgage. Good luck.