What is a Zombie Mortgage?
A zombie mortgage is a situation where a homeowner believes they have walked away from their property and mortgage, only to find out later that they are still legally responsible for the debt. This typically happens when a foreclosure process is not completed, and the homeowner is unaware of their ongoing financial obligations.
How Does it Happen?
When a homeowner stops paying their mortgage and the bank starts the foreclosure process, it can take months or even years to complete. During this time, the homeowner may leave the property assuming they are no longer responsible for the mortgage.
Examples of Zombie Mortgages
- A homeowner stops making mortgage payments and moves out of the property.
- The bank starts the foreclosure process but takes a long time to complete it.
- The homeowner is contacted years later by debt collectors for the unpaid mortgage debt.
Case Study
In 2015, a family in Florida thought they had successfully walked away from their home and mortgage after they stopped making payments. However, five years later, they were shocked to receive a notice from a debt collection agency demanding payment for the outstanding debt on their zombie mortgage.
Statistics on Zombie Mortgages
According to a report by the Consumer Financial Protection Bureau, there are an estimated 1.5 million zombie properties in the United States, with homeowners unaware of their ongoing financial obligations.
