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Mortgage Crisis Watch Business and legal issues affecting: loan repurchases | mortgage-backed securities | mortgage insurance

ZOMBIE TITLE

Think your house has been foreclosed? Think again…

As reported by Michelle Conlin at Reuters, when banks fail to follow through on foreclosure of homes, this has serious, often dramatic ramifications for the homeowner. A person subject to “zombie title” is an individual, who, unbeknownst to him or her, is still the actual homeowner, despite the fact that foreclosure proceedings had begun, and despite the fact that they had not lived in the house, often for lengthy periods of time.

Daren Blomquist, vice president at RealtyTrac was quoted, stating, “The banks are just deciding not to foreclose, even though the homeowners never caught up with their payments.”

The approximately 10 million homes that have fallen into foreclosure since 2006 fall into three categories. The first are homes that are still occupied where the borrowers are not paying their mortgage; the second are those caught up in the robo-signing scandal where the banks foreclosed as quickly as possible, allegedly often without legitimate documents; and the third are these zombie title situations where the homeowners have moved out after receiving notice of a foreclosure or sale, thinking they were leaving the house to the bank. However, it seems that often they were not.

Banks are abandoning foreclosures in the same way homeowners walk away from delinquent mortgages

The banks, by not foreclosing, are able to document the loss, without having to take on any of the costs and responsibilities of ownership. Given that the houses have likely lost significant value, banks are thus avoiding the burden of home ownership.

This limbo status has drastic effects on the homeowner, as he or she is still responsible for taxes, and city services such as trash removal, lawn clipping, and other maintenance. Penalties and interest accrue for failing to pay for these services. Wages can be garnished, and in the example by Ms. Conlin, a person’s life can hang in the balance, as the Social Security Administration rejected an application for disability benefits because of the individual’s “asset”, the house, rendering him ineligible. Without disability coverage, this man cannot get the liver transplant he needs to stay alive.

This situation must be rectified. Banks should not be allowed to continue to abuse the process for the benefit of their bottom line without being held accountable for the ramifications of their actions — or their inaction.