Zombie Foreclosures Haunt Boomerang Buyers
When this phenomenon first began to rear it’s ugly head, I initially tried to avoid using the term “Zombie Foreclosures”. I have however, become more comfortable with the term due to the inability to come up with a more appropriate description of this major problem to hit Boomerang Buyers.
Zombie Foreclosure
It’s been a strange real estate market since the big crash of 2007. As home values dropped, the economy followed suit as hundreds of thousands of families experienced challenges which, in many cases, resulted in the eventual loss of the family home, at least that’s what everyone thought.
After falling behind on house payments, eventually the bank will file a notice of default. A notice of default normally means that a homeowner has only a narrow window of time to catch the mortgage payments up or the lender will foreclose on the home.
Upon receiving the notice of default, knowing that foreclosure was imminent, many families vacated the home, surrendering it to the bank to start life anew and begin the road to recovery. In almost all cases prior to 2007, this story would have ended with the bank foreclosing on the home and everyone going their own way.
That’s what was supposed to happen. Unfortunately, that’s not what happened for many distressed and unsuspecting homeowners. Years later, as families and credit scores healed after a tumultuous past couple of years, an ugly truth surfaced….the foreclosure was not a foreclosure at all, it was still alive!
How to Stop a Zombie Foreclosure
The best way to prevent a Zombie attack is to be proactive, and get prepared. If the above story sounds familiar to you, and you think that there’s a possibility that a Zombie may be stalking you, there’s one way to find out for sure.
Ownership of real property is a matter of public record. These public records are made available when a deed of trust is recorded at the County recorders office, in the County where the home was owned. This record is known as a chain of title, which documents the ownership of a specific piece of property.
To discover whether or not a Zombie foreclosure is haunting you, you will need to look up the chain of title for the home that you thought was long in your past.
Lookup Chain of Title
Access public records online. Many Counties will give you access to a chain of title online either for free or for a small fee. If you are able to obtain a chain of title and are not completely sure how to read it, the next two options might be a great place to start.
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A local real estate agent or lender will have a relationship with a title insurance company that they work with on a regular basis. Title insurance companies can easily access public records and provide you with chain of title.
Contacting a title insurance company directly is another way to request a chain of title. Most title insurance companies will have a customer service line and can get you the information you’re looking for.
You can go directly to the County Recorder’s office and request a chain of title on the property. The County Recorder may charge you a per copy fee for providing you with a copy of the chain of title.
If you find that you have a Zombie in your past, there are 3 things you can do to stop an inevitable attack:
- Contact the bank directly and ask if they will cooperate with a deed in lieu of foreclosure or short sale
- Consult a real estate agent that is a short sale specialist to contact the lender on your behalf
- Do nothing and hope that the bank will eventually foreclose on the home
The first 2 options are by far the best opportunity you will have for some control over the process of creating distance between you and the Zombies. In addition to having control over the timelines with a short sale or deed in lieu, recovering families may have the ability to buy again sooner than if you allow the bank to foreclose.
Related Articles
Zombie foreclosures are common after including a mortgage in bankruptcy. I have hundreds of stories from families that were told by their bankruptcy attorney that the bank would take the home back after including it in bankruptcy.
You will find many stories of families that have Zombies stalking them in the comment streams of these two articles.
- Mortgage Discharged in Bankruptcy is NOT Free and Clear
- Buy Again After Bankruptcy, Foreclosure, Short Sale or Deed in Lieu
If you have any questions about your own particular situation, feel free to review the comments in the above two articles (over 850 total comments) or feel free to ask a question below.
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Help! I filed chapter 7 several years ago. The second mortgage was included and I understood incorrectly how bankruptcy works. I thought I could pay when I sell .. long story : ). Now I have funds to pay and have found a home I would like to buy. If I pay this off now and remove the lien will I qualify for a mortgage? They have not filed foreclosure documents.
Hi Tara, both the first and second mortgages will be paid off when you sell. I would recommend that you contact them and try to settle for as little as they will accept.
The challenge you’re going to have is the “waiting period” after the default. Using a conventional loan that follows Fannie Mae guidelines, there is no waiting period for the default, only a 4 year waiting period following the bankruptcy. You can ignore the subsequent default or foreclosure. FHA will require a 3-year waiting period after a foreclosure.
Since you do not technically have a foreclosure, you’re really only in default, so the waiting period for FHA may only require 12 months of no “late payments”.
This is a little tricky unless you’re working with a loan officer/underwriter that has experience with these guidelines. If you would like, I can introduce you to someone that I know and trust that has experience with situations like yours.
Shoot me an email at scott@findmywayhome.com and let me know what State you’re trying to buy in, and I can make that connection for you.
Hope this helps?
Hi Scott. My husband and I have a property that has a tax lien and back taxes on. There was a start of a foreclosure 11 years ago. The mortgage company went under. The bank that got the mortgages won’t claim it. The lien holder started a foreclosure 7 years ago. Then they sold to another company. Now we would love to move on but this zombie property holds us back. Any recommendations on what to do next? The county won’t help. The new lien holder won’t call me back. We are stuck in limbo of this zombie!
Hi Tricia, I feel like I have more questions than answers…so I’ll ask them here, and you can email me directly at scott@findmywayhome.com if it’s more convenient.
Are you still living in the home? If not, I may have a lender friend that can help you qualify for a new mortgage now 🙂
If you are living in the home, have you been making mortgage payments?
Is there equity in the home? If you listed and sold the home, could you cover the past-due taxes and the mortgage?
Do you have the money to pay the tax liens? Or have you tried to make payment arrangements?
One thought I have is that if the tax liens are too big, it might make the lien holder reluctant to foreclose.
It’s very expensive to foreclose, and the Government always gets their money first. If the current lien holder forecloses, those tax liens need to be paid back before they get their money.
I’ll wait for your answers to determine what options are available from here.
Hope this helps?
We had a judgement of foreclosure entered in court on 7/25/2016 with our lender. We moved out just before the 6 month redemption period ended. We started getting letters from another lender saying they assumed our mortgage in October. We contacted our attorney and he said to ignore it, that our house can not be foreclosed on twice. Now, in May, we are being fined by the county for debris in “our” yard. When I called to let them know the house has been forclosed, they told us the deed is still in our name and no sheriffs sale has been scheduled. How is any of this possible? First we already have a closed foreclosure in court so how can another one file foreclosure on the same house? Oh, and also. we had filed Bankruptcy during this process and have been discharged.
Hi Melody,
I am not an attorney, so my “opinion” here is limited to my exposure to this topic from the perspective of being a mortgage lender that specializes in helping people buy after foreclosure and bankruptcy.
I am also not sure how it works in your State. I am in California, which is a non-judicial foreclosure State.
Here’s what “may” have happened. Either your attorney is 100% correct, and you will need an attorney to get you through this, OR, the order from the judge only “allowed” the lender to foreclose, and they have not yet done so.
I see this a lot where folks receive a notice of default, and even an intent to foreclose notice from the lender, but the lender never actually forecloses. The bottom line is, if you are on title, you are the owner of the home.
If you would like to shoot me the address to scott@findmywayhome.com, I would be happy to try to research public records to see what comes up?
As far as the bankruptcy goes, that does not affect your ownership in the home. A bankruptcy is basically just a tax protection law. It prevents the lender from getting a deficiency judgement against you, and reporting any losses they incur to the IRS as taxable income for you.
I’m really sorry to hear this. It’s hard to imagine that lenders are still dragging their feet in situations like this.
I filed bankruptcy about 6 years ago, and my old home was included. However the house is still showing under my name because the bank didn’t take over. Luckily I was able to buy again through a VA loan, but I still have that zombie home showing up, and Today I was notified by the sheriff’s office that someone was trying to establish residency. Is there anything I can do to keep the house as a potential rental? Obviously I can’t pay 6 years of back pay, but is there something I can do?
Hi Lexie,
I am incredibly surprised that you were able to buy using a VA loan – somebody made a mistake, but it was great for you! The only way you could use that home as a rental is if the lender removes the lien completely. You can always reach out to them, and ask them if they will settle for less than the amount owed.
If they do not want to settle, they have the right to foreclose at any time.
Hope this helps?
Zombiehomes do you have liens on either of these homes/lots? If you do not, I would definitely speak to the City and see if they will allow you to donate the properties. If there are liens against the home, you may have to negotiate something with them and ask them to remove the liens, so you can sell/donate the lots. Can you sell the lots? Would the sales price cover the taxes and demolition bill?
Sorry, I have a lot of questions. Just trying to think of any possible option. Hope this helps?
Hi Scott, Yes we have liens, surprisingly they do not show up on our credit reports, we have talked to the city to try to put them in their land reserve but they will only do that if we have a buyer? We didn’t have buyers for the other 2 that they put in their land reserve. We could sell them, but being in the neighborhood they are in the cost would definitely not cover the taxes and demolition. We talked to a family friend lawyer, he had us quit claim deed the properties back to “Wells Fargo”, just great!!! We had been approved to buy a home for us to live in until these properties reared their ugly heads! From what we are understanding fha will not accept us until we are out of foreclosure 3 years, but were they ever foreclosed on?? We have shared the mortgage releases/2011 from the properties with our lender. These do not show up on our credit reports, we have rebuilt our credit, we make decent money, we have both been at our jobs for 15+ years, our landlord will write us a letter of recommendation for paying $1000 rent per month on time for over 2 years, where do we go from here? and what on earth can we do to get the home we want? We have our down payment/per 3.5% for fha, we had been pre approved so we made an offer and at the last minute during underwriting cant get our home, the loan we want is under $100,000, our landlord has the house we live in on the market for sale, we thought we were moving. What to do? Any of your suggestions are greatly appreciated
Unfortunately FHA guidelines are 3 years from foreclosure. You also were never “approved”, you had bad advice from an inexperienced loan officer that was not familiar with this situation, or your options.
The lien would never show up on your credit. It’s a matter of public record, and you can get a chain of title from the County Recorder’s office. Your loan officer, or title officer may also be able to get you that information.
FHA is definitely not an option, but there may be other options. If you would like, send me an email to scott@findmywayhome.com and I will see if I can introduce you to someone licensed in your State that can help.
Hi Scott, We had, well apparently still have 2 rental homes that we thought were foreclosed on, the city has demolished the homes and the vacant lot remains, along with a demo bill and back taxes in our name. How do we deal with this? How do we get our names off of this? We had 2 other properties that the city demolished and they suggested my husband sign a grant to donate them to the city. Why haven’t they done the same for these?
You make a really good point Scott. And I like your use of the zombie
metaphor. I’ve heard rumors of borrowers hightailing it out of their
home only to have “squatters” move in after them. Banks unwilling to
actually process a foreclosure, presumably so that don’t have to bring
the property onto their books, leave it the matter alone unaware of the new
occupants.
jallenrouman it was very common back in 2008 & 2009 for banks to not foreclose. While I do believe there were some banks that didn’t foreclose for accounting purposes, the more common challenges were the fact that the banks simply were not prepared for the volume of defaults, and couple with that the Government putting the microscope on the foreclosure process made many banks simply halt the process so as to not draw unwanted attention and/or to ensure that they were following the rules. The whole robo-signing lawsuit brought on by the AG’s pretty much put all foreclosures on hold.
Hopefully all of this is behind us and those folks that do have to “surrender” their homes are able to do so in a timely manner so they can begin the road to recovery.
Thank you for your conversation – this isn’t the last we’re going to hear on this topic. It’s going to be a challenge for many boomerang buyers for several years to come.