After a series of health problems, including a stroke that left her in and out of the hospital, Brenda Jones focused on medical expenses and neglected the property taxes on her southeast Houston home for years.

When a lender that specializes in covering delinquent taxes approached with a loan offer, she signed up.

"I do like to pay my bills," said Jones, now 50 and living on a fixed income due to her disabilities. Her mother had worked hard to purchase the house when Jones was a little girl, and Jones had lived there ever since. She didn't want to lose it.

But her health continued to deteriorate. She had another stroke, and diabetes led to a partial leg amputation.

She missed more taxes, then refinanced the loan for $26,893.40. Jones couldn't keep up with the $322.77 monthly payments, and a loan servicing company tried to foreclose on the house. "I was scared," she said. "Where am I going to go?"

Each year, thousands of Texas homeowners take out so-called property tax loans - the industry prefers the term tax lien transfer - to pay their annual bills to the government. Many count themselves lucky they can stay in their homes, but others, like Jones, find themselves buried in debt and on the brink of foreclosure.

While the industry touts the loans as flexible solutions for homeowners in a bind, opponents stress their steep closing costs and high interest rates, comparing them to payday loans.

They are a frequent topic in the Texas Legislature and may be again this session.

"It will definitely be brought up," said Robert Doggett, general counsel for Texas RioGrande Legal Aid. "It's impacting a lot of homeowners."

Rising numbers

In 2013, a total of 15,746 residential and nonresidential property tax loans were made in Texas, 30 percent more than in 2008, according to the Office of Consumer Credit Commissioner. The average interest rate for residential properties was 12.8 percent, and the average closing cost was $707.

Richard Tomlinson, a critic of the loans, said they may save people from immediate foreclosure threats, but they can put them at risk later.

"These loans, as they're being offered here in Texas, are dangerous propositions for consumers," said Tomlinson, director of litigation for Houston-based Lone Star Legal Aid.

Tomlinson represents Jones and others who have struggled with property tax loans. He notified the courts that Jones had received a deferral she's entitled to because of her disability, thus saving her home from foreclosure.

"I feel good and relieved that I have something that my mom had bought and I can keep it and take care of it," said Jones, who inherited the house in 1997.

And since Jones has a disability, she could have found less costly options.

Homeowners who are disabled or at least 65 are eligible for homestead tax exemptions and ceilings. They can partake in quarterly payment plans, and they can defer or postpone property taxes for as long as they live in and own their house. The deferred taxes and interest must be paid once the homeowner moves away, no longer owns the home or dies. Heirs will be liable for the taxes, though elderly spouses can also defer.

'Tweaking the statutes'

Leslie Pettijohn, the state's consumer credit commissioner, said the Legislature has been "tweaking the statutes" that regulate the property tax loan industry the last several sessions. The office regulates these lenders, enforces consumer protections and has brought recommendations the last three sessions. It's recommending a few technical changes for the current session.

The House Committee on Business and Industry and the state bankers group would like to give mortgage lenders a 10-day notice before a property tax loan is finalized with one of their customers.

John Heasley, executive vice president of the Texas Bankers Association, said these loans put the bank's investment at risk because property tax lenders are given lien priority. If a home goes into foreclosure, the property tax lender gets paid before the bank.

"Their business model is based upon the borrower breaking the contract they had with the original borrower," he said.

Banks often find it in their best interest to cover these loans. A 2012 study prepared by the Consumer Credit office found that mortgage companies paid 43 percent of sampled property tax loans that were paid in full.

Jack Nelson, president and CEO of property tax lender Propel Financial Services, said just 12 percent of its noninterest principal payments come from mortgage companies. Because of the dispute, the House Business and Industry committee would like the Texas Legislature to direct the Consumer Credit office to collect better information on how often mortgage companies pay off these loans and whether they do so to protect their collateral.

Nelson also said he is concerned that the 10-day notice requirement would reduce consumers' choice. He said banks will pre-empt the property owner by paying off delinquent taxes. This would prevent homeowners from choosing their payment option, whether it's through a property tax loan, family loan, credit card or county payment plan.

"We think there's a strong demand for different ways to finance property taxes," he said. "And we're one option."

Derrell and Bertha Hopson own a house in southeast Houston. Bertha, 58, considers her property tax loan a blessing.

The couple bought their first house with cash in 2012, and they were paying off moving expenses and other bills when property taxes rolled around. They weren't prepared for the financial burden.

"That was just kind of a scared-straight situation," she said.

Propel Financial Services sent them an advertisement in the mail, and she said working with the company's employees has been wonderful. Propel gave them a leg up so the couple could pay taxes on their own in the future.

Happy with the option

Their monthly bill is $211.62, and the loan has a 13.9 percent interest rate. Hopson said they will pay it off in 2017. In the meantime, they've taken out another loan to pay their 2014 taxes and are putting money aside to pay 2015 taxes on their own.

"There were a lot of sleepless nights," Hopson said. " … But now that we're with Propel, I sleep fine."

Nelson said 11 to 12 percent of Propel's customers return for additional property tax loans. He called critics' comparison to payday lenders "preposterous." Interest rates, he said, aren't nearly as high as payday loans.

In Texas, property tax loans are capped at 18 percent. A typical two-week payday loan has an annual interest rate between 391 percent and 521 percent, according to the Center for Responsible Lending.

Nelson said property tax loans can be more reasonable than letting delinquent property taxes accumulate.

In the course of a year, an $8,000 tax bill can balloon to $11,904 if full penalties and interest are applied by the tax office and collections firm, according to the Consumer Credit office.

In Harris County, penalties and interest for a delinquent property tax increase by 7 percent in February, 9 percent in March, 11 percent in April, 13 percent in May, 15 percent in June and 18 percent in July. After July, attorneys' fees are added.

But the county also has 12-month payment plans with better terms for homestead properties. Delinquent homeowners pay the 7 percent increase in February, but after that, they're charged 1 percent interest for each month.

Historically, about 6,000 people - homeowners, business owners, etc. - would use the county's installment plans each year. But in 2013, almost 8,000 people took advantage of the payment plan. That was the first year tax offices could charge homeowners just 1 percent for interest and no additional penalty. Before, it was more expensive.

Tax Assessor-Collector Mike Sullivan said these lower-cost installment plans help those who fall on hard times. "Paying taxes is not fun for anyone," he said, "and I don't want to make it difficult."

Longer periods sought

While state statute allows these installments to span one to three years, Sullivan believes a 12-month period better positions taxpayers to be on time the following year.

"The longer it goes, the harder it becomes for people to pay," he said.

Tomlinson, with Lone Star Legal Aid, would like tax offices to offer the full three years. Even better, he said, is if legislation required them to provide periods longer than three years. This would be the best option for homeowners struggling to pay their taxes.

"If they extend the time period for repaying property taxes, it's going to have the effect of people avoiding property tax loans and paying off the taxes on their own at a much lower cost," he said. "And they're more likely to be able to keep their homes."