Zombie mortgages are resurfacing as a significant concern for homeowners, lenders, and the housing market. These mortgages, which remain active despite homeowners believing they were resolved or foreclosed, carry hidden risks that can disrupt financial stability.
Here’s why zombie mortgages are so dangerous.
Hidden financial liabilities
Many borrowers assume their mortgage obligations have ended after a foreclosure or a financial settlement. However, zombie mortgages resurface unexpectedly, leaving homeowners liable for unpaid taxes, maintenance costs, and other fees. These surprise liabilities can accumulate over time, creating overwhelming debt for homeowners who were unaware the mortgage still existed.
Risk of foreclosure resurgence
Zombie mortgages often come back to haunt homeowners long after they believe the foreclosure process was complete. Lenders retain the right to restart the process when the foreclosure isn’t finalized, as long as statute of limitation rules are followed. This can lead to sudden eviction notices or legal proceedings, catching homeowners off-guard, and giving them little time to prepare or respond.
Impact on credit scores
Zombie mortgages can damage credit scores, even years after borrowers believe they are debt-free. Lenders may report missed payments, tax delinquencies, or unresolved foreclosure processes to credit bureaus. This negatively affects homeowners’ credit profiles, making securing future loans or financial assistance harder.
Legal and emotional stress
The reappearance of zombie mortgages can lead to legal battles and emotional distress. Homeowners must navigate complex legal procedures to challenge or resolve these claims, often needing professional legal support. The emotional toll of facing unexpected foreclosure or debt collection efforts adds further strain.
What can you do to prevent or resolve this?
Zombie mortgages are dangerous because they create unexpected financial burdens, credit damage and legal complications. Homeowners must stay vigilant, regularly checking public records and seeking legal advice if they suspect their mortgage may not have been fully resolved. Awareness and proactive action are key to avoiding the lurking dangers of zombie mortgages. If you are faced with a zombie mortgage resurgence, there are some steps you can take to fight it:
1- Make sure the lender or holder of the zombie mortgage is attempting to collect the debt legally– Florida has very specific requirements when it comes to foreclosing on second mortgages. If these laws are not strictly followed, the lender or holder of the zombie mortgage may be violating state law.
2- Challenge standing of the lender– Many zombie mortgages resurface after years (sometimes decades) of laying dormant. If the lender cannot provide the proper paperwork to you to show that they have the authority (legally called “standing”) to collect on the debt through foreclosure, then they may be improperly attempting to do this and you may be entitled to have the case thrown out.
3- Check the statute of limitations– In Florida, the statute of limitations on zombie mortgages is five (5) years from the date of default. If a lender is attempting to foreclose after this time period, you may be entitled to have the entire case dismissed.
4- Review federal law for available protections– TILA (Truth in Lending Act) and RESPA (Real Estate Settlement Procedures Act) offer protections to homeowners if certain notice requirements are not followed before attempting to collect on a debt through foreclosure. If these requirements are applicable to your case and were not followed, you might be able to stop the case in its tracks.
5- Loss mitigation– If none of the above apply, then it may be best to engage in loss mitigation talks with the lender. A payment plan that you can afford will help you both get rid of the debt and avoid losing your home to foreclosure at the same time.
If a zombie mortgage is threatening you or has creeped back up from your past, contact Corey Szalai Law, PLLC today schedule a consultation and to discuss how we can help you resolve this debt once and for all.