Federal agency targeting ‘zombie’ foreclosures
After the housing bubble burst around 2006, the U.S. saw a massive wave of foreclosures sweep across the country. As properties lost their value, many people found themselves underwater in their mortgages. Many lost jobs in the accompanying recession, and they found that they could no longer afford to pay their mortgages. Often times, people simply walked away from their homes, letting them fall into foreclosure. In many cases, mortgage lenders did not keep up with foreclosing on the properties upon which people had stopped paying their mortgages. A chilling phenomenon began to spread, known as ‘zombie foreclosures,’ where lenders abandoned properties in the middle of the foreclosure process, and it hurt consumers. The Consumer Financial Protection Board, the federal agency responsible for enforcing federal regulations governing consumer financial products and services, is looking for resolutions to the issues surrounding these foreclosures.
‘Zombie’ foreclosures harm consumers
Zombie foreclosures occur when banks begin the foreclosure process on properties, but then fail to complete it. Banks send the homeowners notice that they are starting foreclosure, and many respond by walking away from their homes. When properties are of low value, rather than spend the money to complete the foreclosure, lenders just write the properties off and let them sit.
People assume that the banks complete the process and they are no longer are responsible for the properties. However, when the foreclosure process remains incomplete, the homeowners are still responsible for the mortgages, taxes, municipal services and maintenance – and they are not aware of it. They accumulate huge amounts of debt that they do not know about, and it can haunt them later.
CFPB addressing the issue
The CFPB is taking steps to address the issue of zombie foreclosures, given the detrimental effect they have on consumers. The CFPB is participating in a task force to identify hundreds of thousands of homes where lenders have not completed the foreclosure process. Additionally, the CFPB is enhancing enforcement of requirements about reporting to borrowers about the statuses of their mortgages, as well as the anti-blight provisions that require that banks release liens on properties instead of leaving them idle.
While foreclosure rates have fallen since reaching peaks in 2012, many people are still struggling to make ends meet and have fallen behind on their mortgage payments. In many cases, people can barely make it from day-to-day, much less make up any back payments they have missed. People who are facing foreclosure and have other overwhelming debts may want to consider bankruptcy as an option for saving their homes. Bankruptcy puts an automatic stay on all collection actions, and foreclosure is a collection action. Bankruptcy can help people catch up on their mortgage payments and reorganize their finances by discharging many of their other debts.
If you are facing foreclosure and feel like you have no options, speak to an experienced bankruptcy attorney who can discuss with you the ways you can save your home.