The Specter of Zombie Foreclosures

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Among other practice areas, our firm has a focus on residential real estate. We offer clients skilled assistance when buying or selling real property and we work with investors and developers interested in obtaining distressed properties held by banks. With the high number of foreclosures in recent years, even banks sometimes walk away from a house heading for foreclosure.

As the U.S. housing market shattered during the recession, many homeowners were unable to pick up the pieces. A lost job led to lost savings and eventually, losing the house. At least two types of questionable banking practices emerged:

  • Robo-signing: Improperly processed foreclosures involving fraudulent affidavits created by lending institutions and banks took an upswing in 2010, leading to legal crises for homeowners and banks across the country.
  • Zombie mortgages: A zombie mortgage or zombie title exists when a homeowner abandons a property and the bank abandons the foreclosure, leaving the homeowner with legal responsibility for the loan and property.

A report from Reuters notes 10 million American homes have fallen into foreclosure since 2006. Too late, homeowners who learn they remain liable for their property face spiraling difficulties including:

  • Past-due loan payments or demands from debt collectors who purchase the debt, often after the bank has charged it off
  • Responsibility for maintenance and upkeep of an unaffordable house or liability for city expenses to keep the property safe
  • Threats of incarceration for overdue fines

After the robo-signing scandal, some lending institutions are more willing to negotiate a short sale or a deed in lieu of foreclosure, or consider a loan modification to keep strapped homeowners in the property.

Zombie mortgages and the houses they affect are a blight on real estate values and trouble for banks, buyers and homeowners. When you have questions about short sale acquisitions in San Mateo, speak with an attorney at our firm.

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With the high number of foreclosures in recent years, even banks sometimes walk away from a house heading for foreclosure.

As the U.S. housing market shattered during the recession, many homeowners were unable to pick up the pieces. A lost job led to lost savings and eventually, losing the house. At least two types of questionable banking practices emerged:

  • Robo-signing: Improperly processed foreclosures involving fraudulent affidavits created by lending institutions and banks took an upswing in 2010, leading to legal crises for homeowners and banks across the country.
  • Zombie mortgages: A zombie mortgage or zombie title exists when a homeowner abandons a property and the bank abandons the foreclosure, leaving the homeowner with legal responsibility for the loan and property.

A report from Reuters notes 10 million American homes have fallen into foreclosure since 2006. Too late, homeowners who learn they remain liable for their property face spiraling difficulties including:

  • Past-due loan payments or demands from debt collectors who purchase the debt, often after the bank has charged it off
  • Responsibility for maintenance and upkeep of an unaffordable house or liability for city expenses to keep the property safe
  • Threats of incarceration for overdue fines

After the robo-signing scandal, some lending institutions are more willing to negotiate a short sale or a deed in lieu of foreclosure, or consider a loan modification to keep strapped homeowners in the property.

Zombie mortgages and the houses they affect are a blight on real estate values and trouble for banks, buyers and homeowners.

Topics:  Foreclosure, Real Estate Market, Robo-Signing, Zombie Title

Published In: Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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