The Walking Dead … Mortgages?
posted at 2:57 pm on April 2, 2013 by Ed Morrissey
CBS reports on a rising number of “zombie” mortgages that may stick former homeowners with massive property tax bills, among other obligations:
So-called zombie homes are appearing on the real estate market, but they’re not built to keep out the walking dead.
Hundreds of thousands of homes in the U.S. are now labeled as “zombie” foreclosures. That’s when the owner of a foreclosed home leaves only to find out years later that he or she still legally owns the home and is on the hook for property taxes and other fees. Such cases occur in more than a third of foreclosures, industry figures show.
In a typical foreclosure, the bank takes possession of the home and title, then auctions it off to the highest bidder. But when foreclosures soared after the 2008 housing crash, banks had trouble unloading certain properties. So to save on the taxes and other costs associated with seizing a home, the banks never officially foreclosed on these properties. That leaves the former owner with the legal obligation to pay those expenses…
In a zombie foreclosure, the owner of the property typically receives a foreclosure notice and moves out, only to be hit with property taxes years after the home was abandoned because the bank never took possession. That unpaid debt can destroy the owner’s credit score, which was already hurt by the foreclosure process.
I wonder, though, how many of these are foreclosures that banks failed to take into their possession — and how many of these are walkaways, where the owner simply abandoned homes with mortgages so upside-down that the owner could never clear the difference. That became a real trend in the wake of the 2008 housing bubble collapse, and this kind of outcome seems a likely consequence if the bank had not been warned to take possession before the owner split.