A new term has been gaining prominence in the housing market. Zombie foreclosures refer to lenders that never complete the official foreclosure proceedings for homes, so homeowners are still liable for taxes and other financial issues. Although banks and lenders have already evicted these homeowners, the zombie foreclosure status of their homes mean they are still stuck paying the bills.
“The fall of the housing market has left many lenders with more homes than they could handle. Often, foreclosure proceedings are delayed or canceled while the houses sit vacant and turn into easy prey for vandals. This leaves homeowners with legal liabilities for homes they no longer live in or think they own. Banks have been using this trick to leave thousands of homeowners with tax bills and other payments.
“The decision of many lenders to not foreclose on homes has created the zombie house status that is showing up across the nation. Many of these houses have been completely destroyed by vandals and have mounting back taxes. Recent estimates indicate that there may be 2 million zombie foreclosures in the United States. Although there are a few cases of homeowners choosing to remain in theses houses, the majority have been abandoned.
“The issue is exacerbated by many homeowners who leave without realizing that the foreclosure process has not been completed. They believe that once they close the door behind them the house becomes the bank’s problem. However, if the foreclosure process is canceled or simply does not go through, they are stuck with tax bills, trash removal bills and other financial issues. Zombie foreclosures are becoming a greater concern because many banks have stalled their foreclosure processes due to an overwhelming amount of unpaid mortgages. Essentially, lenders are walking away from the homes and leaving people to deal with the crisis.
“Several lawmakers have proposed a new rule that would force banks to notify homeowners if the foreclosure process is stalled or canceled. Currently, there is nothing protecting homeowners from lenders walking away. They are often stuck with tax liens, code violations, debt collectors and others. Many are left wondering why the Consumer Financial Protection Bureau has done nothing to help people. Considering that this appears to be a clear case of foreclosure abuse, homeowners are hoping new laws will make a difference. However, the Mortgage Bankers Association has already rejected previous offers to make changes and is not cooperating.