Zombie Foreclosures

If you are like me the title of this blog grabbed your attention.  When I first heard this term it excited me as it referred to two of my favorite things, real estate and zombies. I will give a quick explanation of this new term and maybe even some good advice to those that may need it.

Before a home can be foreclosed on there is a process that must be followed.  Once a homeowner falls behind on their payments, the bank must serve them with notice of their intent to foreclose if payment is not made current.  Usually a borrower will receive many of these through multiple means.  Banks will be happy to call multiple times a day, send tons of emails, and give the post office plenty of work delivering the same warnings. Once these items are delivered through certified mail or a service like Fed-Ex, then the bank is getting serious.

Once the borrower has been given due notice the bank must follow up with filing a lawsuit to foreclose on the process.  This is followed by  hearings, pleadings, motions, and finally if everything goes through it will be allowed to go to a foreclosure sale.  These precedings can take a very long time due to the backlong that courts and banks have due to the overwhelming amount of homeowners that have fallen behind.

Because of this backlog many homes have been on the books for multiple months or even years waiting for the courts to decide on their fate.  These homes are neither paying monthly mortgages, nor are they moving forward, but are in a limbo.  These are the zombie foreclosures, called that because of the “undead” state they are trapped in.

Homeowners that are in this predicament need to stay on top of what is going on with their homes.  It is important to stay in contact with the banks that are attempting to foreclose.  Homeowners that suffered a temporary hardship such as sickness or unemployment should always attempt every means to find a solution outside of foreclosure.  Some banks are willing to work with borrowers to come to terms to assist them in getting current, but if the paperwork has been filed this may not be an option.  Regulations now prevent a bank from foreclosing while they are working on a solution to prevent homeowners who think they are keeping their home from losing their homes unexpectedly.

Also this year the Mortgage Debt Relief Act has been extended, allowing homeowners to sell their home as a short-sale without tax penalty. This is very important for those that are suffering financially as many couldn’t afford the increased tax penalty. Homeowners can also surrender their deed instead of going into foreclosure if they just want the process to end.

The important thing for homeowners to do is to stay abreast of the situation.  If you have left the home you need to be aware of any liability you may still have for the property and any items dealing with it you may still be held responsible for.  If you have not talked to a Realtor about a possible short sale, do so.  The massive amount of foreclosures are showing some light at the end of the tunnel, but for now it is still a large problem for the housing industry and the nation.