Green Room

The Walking Dead … Mortgages?

posted at 2:57 pm on April 2, 2013 by

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.

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Even movie stars walk away…

http://realestalker.blogspot.com/2012/02/update-kristen-bell.html

Blake on April 2, 2013 at 3:09 PM

Why would you walk away if you could just stop paying?

astonerii on April 2, 2013 at 3:11 PM

As a banker (or bankster if you read ZeroHedge) I hate to say it but the lesson from this might be to never leave your home until the police force you out.

ramesees on April 2, 2013 at 3:24 PM

As a banker (or bankster if you read ZeroHedge) I hate to say it but the lesson from this might be to never leave your home until the police force you out.

ramesees on April 2, 2013 at 3:24 PM

Well, I’d recommend right BEFORE the police force you out. Otherwise you’ll have a hard time getting back in to get your stuff.

wearyman on April 2, 2013 at 4:09 PM

This story is bogus, just another attempt to squeeze some tears out of the sad story of delinquent homeowners. Property taxes are assessed against property, not individuals. If the owner of a property doesn’t pay the tax, the county forecloses on the property. Real property taxes are not reported on anyone’s credit because they always have priority over other claims on the property (including previously recorded mortgages) and are never as much as the value of the property, meaning they always get paid.

kclibby on April 2, 2013 at 4:40 PM

These zombies eat the wallets of deadbeats.

michaelo on April 2, 2013 at 4:51 PM

For #2, why would you just walk away? A) you got a job in another city, or B) you had a house in Detroit. #4, actually some property tax bills ARE bigger than the value of the property, especially on run down commercial property. Or in places like, again, Detroit, where there are houses with a 10k market value that owe $60k in back taxes.

That’s when the high tax jurisdiction just won themselves the right to take over another crackhouse. Congratulations, good move!

Tom Servo on April 2, 2013 at 4:58 PM

Property taxes are not personal obligations, in effect, the property owes them. Individuals don’t have to pay them at all.

But if unpaid, the government will sell the property at a tax sale.

krome on April 2, 2013 at 5:41 PM

Related:
This is a really good run down of not only what is wrong with “Bailout Economics”, but also with Goldbug obsession with the Fed.
http://www.realclearmarkets.com/articles/2013/04/02/david_stockman_brings_new_meaning_to_flawed_economic_analysis_100232.html

Count to 10 on April 2, 2013 at 8:57 PM

How do they expect to sell that property when their are tax liens or an improper foreclosure…?
No bank will finance a new loan on it and a cash buyer won’t touch it.

NeoKong on April 3, 2013 at 11:49 AM

This story is bogus, just another attempt to squeeze some tears out of the sad story of delinquent homeowners. Property taxes are assessed against property, not individuals. If the owner of a property doesn’t pay the tax, the county forecloses on the property. Real property taxes are not reported on anyone’s credit because they always have priority over other claims on the property (including previously recorded mortgages) and are never as much as the value of the property, meaning they always get paid.

kclibby on April 2, 2013 at 4:40 PM

Property taxes are not personal obligations, in effect, the property owes them. Individuals don’t have to pay them at all.

But if unpaid, the government will sell the property at a tax sale.

krome on April 2, 2013 at 5:41 PM

Yep.

toliver on April 3, 2013 at 4:12 PM