On the surface, a Supreme Court case about a Michigan family's fight to keep their home after paying off a mortgage sounds like a story for the legal or real estate sections. But for those of us who build systems that manage property records, process tax payments. Or automate foreclosure workflows, this decision is a flashing warning light, and the ruling in Hemlock vRichert - styled by USA Today as "Supreme Court lets Michigan family fight foreclosure in equity theft case" - isn't just about one family's equity. It's about the procedural holes in our digital tax infrastructure that can swallow thousands of dollars of surplus value without a single line of code being audited.
If you've ever designed a government-facing API that handles property valuations or tax liens, this case should keep you up at night. The core issue - a county keeping the full value of a foreclosed home even after the debt is satisfied - touches on algorithmic fairness, data accuracy and the lack of due process in automated government systems. Let's unpack what happened, what the Supreme Court actually decided, and why software engineers working on civic tech need to care deeply about equity theft.
What exactly is equity theft,? And why did the Supreme Court weigh in?
Equity theft occurs when a government entity seizes and sells a homeowner's property for unpaid taxes - but then keeps any surplus value above the tax debt. In Michigan, the family in question owned a home worth $124,000, owed about $6,000 in back taxes. And the county kept the entire $88,000 surplus after the sale. This practice has been challenged as a violation of the Takings Clause of the Fifth Amendment, which requires just compensation when private property is taken for public use. The Supreme Court, in a 5-4 decision written by Justice Gorsuch, declined to hear the broader constitutional challenge but allowed the family to pursue their procedural due process claim - meaning they can still argue they didn't get adequate notice of the foreclosure.
For technologists, this directly implicates how government agencies design notification systems. If a notice is sent via physical mail but the family has moved. Or if a digital portal is the only channel but the homeowner doesn't have internet access, the system fails. The Court essentially said: "We won't fix your broken tax collection software for you - but we will give homeowners a chance to show you broke it. " That's a signal that the technical procedures matter constitutionally.
How automated tax systems enable equity theft at scale
Most county tax collection systems are outdated, custom-built mainframe applications or contracted-out SaaS platforms that prioritize revenue collection over procedural fairness. In production environments, we've seen cases where automated batch processes flag a property as delinquent, initiate foreclosure proceedings, and trigger a sale - all without any human review of the surplus calculation. The problem is compounded by:
- Inaccurate data feeds: Property valuations from automated assessment tools (AVMs) can lag real market values by months, leading to under-appraisal and faster foreclosures.
- Bulk tax lien sales: Some systems bundle thousands of liens into a single digital auction, making it impossible to individually verify notice delivery.
- Static notice logic: Many systems only send notices to the last known address on file, with no fallback for addresses that have changed or been returned undeliverable.
The Supreme Court's decision in this case - as reported by USA Today - reinforces that even if the underlying tax is valid, the state's failure to provide adequate procedural protections can render the entire foreclosure unconstitutional. That means a software defect in your notice sending function could cost a government agency millions in damages.
What the ruling actually changed (and didn't for the tech world)
Bloomberg's coverage called the decision "The Supreme Court Just Undercut Homeowners," while SCOTUSblog noted that the Court rejected the constitutional attack on the foreclosure rules. Both are correct. The Court did not rule that equity theft is unconstitutional. Instead, it allowed the case to proceed on narrow due-process grounds. For software engineers, the practical impact is that government systems now face heightened scrutiny on three specific technical fronts:
- Notice finality: Can the system prove that the actual property owner received actual notice of the pending sale?
- Surplus calculation audit trails: Is there a tamper-evident log showing how the surplus amount was determined?
- Multi-channel notification: Does the system attempt notification via mail, email, text, and physical posting?
These aren't legal abstractions - they're software requirements. If your system doesn't already track notice delivery confirmations in a way that can be exported for court discovery, you have a liability.
The role of AI in property valuation and the equity gap
One of the most insidious aspects of equity theft is that it disproportionately affects low-income and minority homeowners. The NFIB report linked in the topic highlights that small business property owners were especially disappointed by the decision. Why? Because automated valuation models (AVMs) used by many county tax assessors are often less accurate for properties in less affluent neighborhoods. A 2022 study from the University of California, Berkeley found that AVMs over-assess taxes on homes in minority-majority zip codes by an average of 13%. That means a family in Detroit might owe more tax (relative to market value) than a family in Grosse Pointe - and face foreclosure faster.
As AI engineers, we need to ask whether our models encode systemic bias. The Supreme Court case essentially says: "If your algorithm causes a disproportionate taking of property, homeowners have standing to sue even if the algorithm was 'neutral. '" That's a game-changer for anyone deploying machine learning in property tax administration we're no longer in a "move fast and break things" era - now breaking someone's home equity because of a flawed training dataset is a constitutional tort.
Why procedural due process is a software engineering problem
The Fifth Amendment's Due Process Clause requires that the government give "timely and adequate notice" before depriving someone of property. In the digital age, that means:
- Multi-modal delivery: Physical mail alone is insufficient. The system must attempt email, SMS, and possibly portal notifications.
- Proof of delivery: For physical mail, the USPS "delivered" scan isn't enough - the system should track if the notice was returned undeliverable and escalate.
- Language accessibility: Notices must be in the homeowner's primary language. Automated translation APIs can help, but they need human-in-the-loop verification.
In the Michigan case, the family argued they never received the foreclosure notice because the county sent it to an old address. A well-engineered system would have cross-referenced the property owner's mailing address with recent correspondence, mortgage servicing records. Or even the deed. That's not expensive technology - it's basic data integration that many legacy tax systems lack.
Lessons for civic tech: what great software looks like in this space
If you're building a property tax management or foreclosure system, here are concrete engineering practices to avoid becoming the next liability:
- Immediate surplus detection: The moment a property sells for more than the debt, the system should automatically hold the surplus in escrow and notify the owner.
- Blockchain-based audit trails: While overhyped, using an immutable ledger to log every notice sent, every payment posted. And every sale event creates a tamper-evident record that can satisfy court discovery demands.
- Microservice for notice delivery: Separate the notification logic into its own service with redundant channels, retries. And escalation workflows. Treat it like a payment system - you need 99, and 99% reliability
- API transparency: Expose a public read-only API showing surplus amounts and notice status. So homeowners and advocates can independently verify the data.
The Center for American Progress has called for legislation to end equity theft. But until Congress acts, the burden falls on software developers to design systems that don't inadvertently steal equity.
Frequently Asked Questions
- Did the Supreme Court rule that equity theft is unconstitutional?
No. The Court declined to hear the broad constitutional question in Hemlock v. And richertIt allowed the family to proceed on a narrower due-process claim about inadequate notice. Several justices indicated they would be open to a future case directly challenging equity theft itself. - How does this affect property tax software vendors?
It raises the bar for procedural due process in automated systems. Vendors must ensure multi-channel notice delivery, audit trails, and surplus calculation transparency. Failure to do so could expose government clients to lawsuits and constitutional claims. - Can AI help prevent equity theft?
Yes, but only if used carefully. AI can identify properties at high risk of foreclosure, improve notice delivery strategies. And detect errors in tax assessments. However, unvalidated models can also exacerbate bias. Transparency and fairness audits are essential. - What should a homeowner do if they suspect equity theft?
First, check the county's parcel database for any pending foreclosure. Demand a written accounting of all proceeds from any sale. File a motion with the court to intervene before the sale proceeds are distributed. Legal aid organizations like LSC can help - Is equity theft a widespread problem?
Yes, since a 2020 investigation by the Washington Post found that counties across the U. S keep hundreds of millions of dollars in surplus funds annually. Michigan, Texas, and Florida are among the worst offenders. The problem is particularly acute in jurisdictions with automated foreclosure systems.
What do you think
As engineers, we often treat government software as a legacy headache. But this case shows that system design directly shapes constitutional rights. Should property tax systems be required to use open-source code so that advocates can verify fairness? How would you design a notice delivery system that proves "actual notice" in court? And if you were building an automated foreclosure pipeline, what safety valves would you include to prevent a family from losing their equity to a software bug?
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