07/27/2022
Zombie Second Mortgages Haunting Homeowners with Foreclosures
A nightmare trend that homeowners are seeing across the country is zombie second mortgages. Zombie second mortgages are rising from the past to haunt unsuspected homeowners by starting foreclosure proceedings and threatening their ability to stay in their homes. What many homeowners didn’t know is that there are second mortgages included in bankruptcy that can foreclose years after debt has been discharged.
How Zombie Second Mortgages Are Forcing Families Into Foreclosure.
Many homeowners across the country with second mortgages on their houses have received letters stating that their loan was “charged off” or “discharged” during (or even before) the 2008 market crash. Many lenders also disappeared during this time, leaving homeowners with no idea who they were supposed to pay their mortgage to.
Homeowners interpreted this to mean that their second mortgage debt no longer existed or no longer needed to be paid. However, in reality, the bank had taken a tax write-off on the debt and sold it to a third party for pennies on the dollar. These third-party banks or collection agencies have held on to the debt for over a decade, making no effort to collect monthly payments while interests accrued heavily – all of this occurring without the homeowner’s knowledge.
Now that the real estate market is improving and homeowner equity has increased, collection agencies are reappearing like “zombies” and are attempting to collect the entire amount of debt owed on the second mortgage.
Not only are these collection agencies trying to recover second mortgages, but they also want to collect over a decade’s worth of accrued interest and foreclosed homes.
I Filed for Chapter 7 Bankruptcy. Am I Still at Risk of Zombie Foreclosures?
If you were a homeowner when you filed for Chapter 7 bankruptcy, you may not be protected against zombie second mortgage foreclosures. Unfortunately, Chapter 7 bankruptcy helps individuals get rid of their debt but it still leaves the debt attached to the house.
In a zombie foreclosure, because the home's title isn't transferred out of the homeowner's name, the homeowner still has the legal obligation to pay certain debts. Debts associated with property ownership can go unpaid for years and then come back to haunt people who had no idea that the foreclosure process was never completed.
