What are “Zombie Properties” and What Can You Do About Them?
When property owners receive a foreclosure notice, some pack up and move they because they assume the lender will take over the property. But in some cases, the bank doesn’t finish the process. When the bank doesn’t complete the process, the title remains in the absent property owner’s name and can lead to some disturbing consequences for property owners and communities. Hence the name “Zombie Properties.”
Approximately 20% of properties in mortgage foreclosure are characterized as “zombie properties.” These abandoned properties are often in disrepair and a burden on surrounding homeowners and the Community Association.
Zombie Properties: Why Do They Happen?
When the homeowner moves out after foreclosure has been started, but the foreclosure is never completed, it becomes known as a “zombie properties” (sometimes also called a “zombie foreclosure” or “zombie title”).
With a “zombie property,” the foreclosure sale is never held or the title is never transferred to a new owner. The title remains in the property owner’s name. Sometimes “zombie properties” happen when the lender is not willing to assume responsibility for the upkeep of the property and wants to save on taxes and other costs.
If the property was involved in the robo-signing scandal, the foreclosure might not have been completed. Sometimes lenders don’t follow through with foreclosures if they have too much inventory, if the paperwork gets lost or if the costs of foreclosing don’t warrant completing the foreclosure.
Thousands of “Zombie Properties” Haunt the Country
When the housing crisis began, thousands of properties went into foreclosure but did not emerge from the process. Some estimate that at one point there were more than 300,000 “zombie properties” in the U.S. By 2014, the number dropped to about half the amount but some states still had large numbers of “zombie homes.”
The states with the highest numbers of “zombie properties” include Florida, Illinois, New York, and New Jersey because these states have long foreclosure processes. When the foreclosure process drags on, more owners tend to abandon their property.
As home prices go up, the values of the “zombie homes” also increase. Banks start pushing the “zombie homes” through the foreclosure process and get them to auction more quickly. This is why the numbers of “zombie homes” are down in Arizona, California, Nevada, Ohio, Washington, and other states.
Zombie Foreclosures Cause Homeowners to Suffer
When a property is in foreclosure, the property owner still has the legal obligation to pay for property taxes, COA or HOA dues, and maintenance on the property.
- The tax collector is looking to collect back property taxes.
- The COA or HOA may file a lawsuit to recover unpaid assessments.
- Fines and possible jail time for not complying with housing codes, ordinances, and repair deadlines.
- The local government billing for yard maintenance, repairs, trash removal, and graffiti removal.
- Credit scores, already damaged by the foreclosure process, will be even worse due to the unpaid debt.
If debts go unpaid, then they can come back to haunt property owners years later who have no idea that the foreclosure process was never completed. Banks are not always required to inform the homeowner that the foreclosure process has stopped. Sometimes banks may not be able to locate property owners who have moved out.
“Zombie properties” also harm neighborhoods. When properties are vacant and show signs of neglect, it can drag down the value of the entire neighborhood. These unattended homes are also susceptible to vandalism, squatters and crime.
What You Can Do About ‘Zombie Properties”
Work with your Association’s collection attorney to determine which properties in your community are “zombies” and file a complaint with The Consumer Financial Protection Bureau. The CFPB assists consumers by regulating banks, credit agencies, and financial companies. The CFPB is now taking an interest in “zombie properties” and together with the Community Association Institute (CAI) is asking for communities to report and regulation zombie properties and the banks responsible for them. The CFPB requires banks to maintain distressed properties during mortgage foreclosure.
Filing a complaint will increase awareness of the issue with the intent that the CFPB will be able to enforce the bank’s responsibility to maintain the property.
Here’s how to submit a complaint about a “zombie property” to the CFPB.
- Select the category “Mortgage” from the options on the screen.
- Click the blue tab that reads “Get started”.
- Tell the CFPB your association’s story in the area provided for the description of the incidence. Be sure to stress the length of time that a property has been awaiting foreclosure, the effects the bank’s inaction has had on the Association, and any other problems that have been caused by the bank’s failure to timely complete the foreclosure.
- Below the narration field, check the box that states, “I want the CFPB to publish this description on consumerfinance.gov so that others can learn from my experience.” This will allow others to see the negative impact a bank can have on a Community Association when delaying foreclosure.
- Below the check box, in the area labeled “which part of the mortgage process is your issue related to,” select the field that reads “Problems when you are unable to pay” Loan modification, foreclosure.
- Check “No” for the question, “Are you concerned about losing your home to foreclosure?”
- Next select “Other” from the drop down box that reads “My loan is a(n):
- After selecting “Other” a field will appear asking you to specify the issue. Enter “bank delayed foreclosure”
- You will now be taken to a page that will allow you to enter your desired resolution. Explain that you would like the bank to maintain the property and complete the foreclosure process in a timely manner so that the Association may preserve the financial health and security of other homeowners living within the community. Give examples on what steps the bank can take to alleviate the financial burden on the association and its homeowners.
- Clicking “continue” takes you to another page which will ask you to complete your personal contact information.
- Upon completion of your contact info, click “continue” once more and you will then be required to provide the name of the bank. The CFPB will forward your complaint directly to the institution named. You may also upload any supporting documents or materials that may be appropriate.
- When finished, click “continue” one more time to be taken to a review screen of your entered information.
- When finished, click “Submit” at the bottom of the page and the CFPB will forward your complaint to the respective company. Your complaint will also be published as part of the CFPB’s complaint database.
- Send CAI an email (email@example.com) to notify them you filed a complaint. This will help quantify the problem for Members of Congress as it will support advocacy efforts on Capitol Hill.