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I had never heard of a "Zombie Foreclosure". Have you?

Just hoping some of you have more information on what Zombie Foreclosures are. Also, is that the formal title for them?

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From what I read in a recent article on DS News they are homes where the foreclosure process has started but was never completed. Thus, the home owner leaves the property abandoned before the process is completed.

Yep - that's it!  The bank starts foreclosure.  The borrower abandons the house.  The bank doesn't follow through, doesn't send their attorney to the sheriff sale.  No bid, no sale.  Deterioration sets in.  Taxes pile up.  Borrower has no idea they are still responsible for the property if there's no forwarding address.  ZOMBIE.......dead but not really....

I had one where the borrower gave me the keys.  Great.  Sheriff sale comes and goes.  Bank sent no one.  Asset manager at the bank doesn't know a thing.  Never got an answer.  At least I was able to notify the borrower and remind him he will still owe property taxes, etc.  "Why not just rent it out"?

I ask all occupants to stay in the house for as long as they can barring eviction or wait until eviction if they don't care what goes on their record anymore.  If you've gotta leave, consider being a landlord and make some money.... 

just the name scares me

I wonder who is responsible if the abandon property is burnt down. Is it still the borrower?  Here is what I found regarding this Zombie issue.

Since title is never transferred out of the homeowner’s name, he or she still has the legal obligation to pay for certain debts and expenses such as property taxes, HOA dues, and maintenance on the property. Debts associated with these responsibilities can go unpaid for years and then come back to haunt homeowners who have no idea that the foreclosure process was never completed. (In some cases, the bank may not be legally required to inform the homeowner that the foreclosure has stopped or it may not be able to locate a homeowner who has moved out.)

For example, if you leave your property and title is never transferred out of your name, the following things, among others, could happen months or even years later:

  • The tax collector may come looking to collect back property taxes
  • HOA may file a lawsuit to recover unpaid assessments
  • You could be threatened with fines for not complying with housing codes and ordinances (and even face jail time in some instances if you don’t meet repair deadlines), or
  • The local government may send you a bill for yard maintenance, repairs, trash removal, and/or graffiti scrubbing.

Plus, your credit score, which was already damaged by the foreclosure process, will be even worse due to the unpaid debt.

Personally, I think the bank should just ask a local Realtor to find out the status of a homeowner, after they filed a trustee sale.  They really do not need any Asset Manager companies (can be costly) when they have a local bank and us Realtors to help them make a non-preforming note into a preforming note.  All we Realtors need are options we can present to the borrowers if they wish to keep their home.  We Realtors would have a personal touch in showing the borrower a breakdown on what they can really afford with their month income vs. their monthly expenses.  I call this building a relationship with the borrower, so they can see the light that the property they own may or may not be a good investment.  The borrowers really need to be educated on which is better for them by using us Realtors.  After all, the banks/lenders have tried whatever resources they had and nothing has worked that great.  ....  This is just my thought

Good thoughts, Sally, but the market has been there done that. First there are very few "local" banks. Most sold their servicing rights the same day the loan was finalized and have nothing to do with the loan much less the borrower. There were efforts to send us local agents to meet with borrowers about loan modifications that did nothing for the then under or unemployed who to this day couldnt make a quarter of a reasonable payment amount. Then there was HAMP and HARP and HOPE. Now short sales.

Cece,

I heard different.  I thought it was the mortgage notes that got sold, but the banks/lenders who has all the original documents and sold the notes has the responsibility of servicing the notes by collecting the monthly mortgage payment(s), and taking care of any issue from the borrower(s) for the note holders.  (Note holders can be an investor, corporation, mutual fund companies, insurance companies, … etc. And they can be resold outside of the USA).

The banks/lenders had used Asset Management companies on REOs with the help of Realtors.  Wells Fargo had trained Realtors on short sales to bring the non-preforming notes into preforming.  The process was faster than using a 3rd party.

Most bankers/lenders tried to do a loan mod with borrowers probably thousands of miles away, which most of them have failed.  And for some reason, documents get lost and borrowers are getting worn out with a lot of BPOs being done on their home.  I met a few who mentioned they have been trying for years.

I believe with the amount of money they spent with their staff people, they could of paid us Realtors to get the job done faster

I also believe if they had used a Realtor who probably could have given a reality check to the borrower(s) on their monthly income vs. their monthly expenses by offering a cheat sheet to fill out on their monthly income and monthly expenses, the borrower may realize they have a problem.  We as Realtors can communicate with people face to face and ask the borrowers questions which bankers/lenders cannot really do.  Question like “Do you really think as a homeowner that this home is a good investment for you, while you are struggling to find money to pay the mortgage?”  Or maybe “Do you think this is the only home for you and your family?”. We wait and listen.  And hopefully show them how to get back on track with a program to buy a more affordable home in 2 to 3 years.      …  This is just a thought on helping people to make a good decision without pressure.

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