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.
Here is everything you need to know about zombie foreclosures and how to protect yourself from them.
If you are receiving threats of a zombie second mortgage foreclosure, contact our team at McFarlin LLP today to schedule a consultation: (949) 570-5025!
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.
How to Avoid or Protect Yourself from a Zombie Problem
If you received a letter stating that you need to pay your second mortgage, it is best to remain in your home for as long as possible during the foreclosure process. There may be options available for you to avoid becoming a victim of a zombie foreclosure if you stay at your home through the entire process. You should also seek guidance from an experienced foreclosure attorney as quickly as possible.
Our team at McFarlin LLP understands the complexities of zombie second mortgage foreclosures and we can help you repair your situation — especially if you can demonstrate that you have not received an invoice request from creditors for over a decade. We understand how horrifying this situation can be, especially when you thought you were back on track with your finances. That is why our Irvine foreclosure attorneys are dedicated to helping you with this process from beginning to end.
Contact our Southern California foreclosure lawyers today at (949) 570-5025 to schedule a consultation!