Zombie Foreclosures Still Problem in 2015

Zombie Foreclosures Still Problem in 2015

In a standard foreclosure situation, the bank takes possession of the home from the current owner and then sells it at auction. However, Zombie foreclosuressometimes the bank chooses to save on costs associated with seizing the home and never officially forecloses on the property.  The home will become a zombie foreclosure and the owner’s name will remain on the property title.  According to RealtyTrac, these “zombie foreclosures” are declining but in Chicago still represent 21% of all homes in the  foreclosure process.   Homeowners often do not discover that they are still in possession of the home for months or even years after they have moved out.

 
The consequences of a zombie foreclosure
Zombie foreclosures can result in serious consequences for home owners.  For example, according to Reuters, a man and his wife moved out of their home after falling behind on their mortgage payments.  They received a note from his bank telling him that his property would be foreclosed upon. Due to this, the man thought that he would never have to worry about the home again.
However, about a year later, the man started receiving bills from a tax collector for waste removal, sewer fees and back taxes. After this occurred, a debt collector started pressing the man to pay his mortgage, which had risen substantially due to penalties and property fees. Not only was the man held liable for thousands of dollars in debt because he still technically owned the home, but he was denied disability coverage from the Social Security Administration because ownership of his home rendered him ineligible.
What homeowners need to remember
To prevent themselves from the effects of zombie foreclosures, there are several things homeowners should keep in mind before they choose to walk away from their mortgage. These include the following:

  • Their name remains on the property title until it is sold to someone else
  • Banks do not always tell property owners that they have stopped the foreclosure process
  • Owners can be held liable for repairs, property taxes and maintenance fees by their local government
  • The bank is under no obligation to seize ownership or take responsibility of the property
  • They can work with their bank to get them to agree to devising a deed or putting the home up for a short sale instead of a foreclosure

Understanding how the foreclosure process works can help homeowners avoid the disastrous and stressful consequences of dealing with a zombie foreclosure. Those who are facing foreclosure may benefit from speaking with an attorney who can provide information about this process and what they can do to protect themselves in case the bank does not take over the property.
 
 

Millie C. Lumpkin, Broker