Friday, July 19, 2024

The resurgence of zombie mortgages: What you need to know

The Return of Zombie Mortgages: What You Need to Know

Zombie Mortgages Rise Again: What You Need to Know

Zombie mortgages, the lingering horror from the 2008 recession, are back with a vengeance as home prices continue to climb. These mortgages, which are essentially forgotten second mortgages that homeowners believed were resolved, are causing a new wave of problems for unsuspecting homeowners.

According to David Weber, a professor at Creighton University School of Law, some homeowners may not even realize that a secondary lender has a claim on their property. This can lead to a host of issues, including retroactive interest, late fees, debt collections, and even the threat of foreclosure.

So, what exactly is a zombie mortgage? These are second mortgages, such as home equity loans or lines of credit, that were thought to be settled through forgiveness, modification, or discharge in bankruptcy. However, debt collectors are now resurfacing and claiming the right to collect these debts or foreclose on the property.

How do these zombie mortgages happen? Often, homeowners fall behind on payments and vacate the property, assuming the bank will foreclose. However, during the housing crisis, many lenders chose not to finalize foreclosures due to plummeting home values. Additionally, misunderstandings following actions like short sales, bankruptcies, or modifications to the primary mortgage can result in unresolved second mortgages.

If you’re concerned about whether you have a zombie mortgage, there are some steps you can take. Check public property records for any secondary liens on your property, review old tax filings for forgiven debt that wasn’t reported, and examine any related paperwork from mortgage modifications.

If you discover a zombie mortgage on your property, it’s crucial to take action. Request detailed information from the creditor, consider seeking legal advice, and explore options for disputing or settling the debt. Ignoring the issue could have severe consequences, so it’s essential to address it promptly.

As the specter of zombie mortgages looms once again, homeowners must remain vigilant and proactive in protecting their properties from these financial undead.

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