What to Do If the “zombie Mortgage” Is Stalking You Again
Home prices are rising , interest rates are at their highest levels in more than a decade , and paying off a mortgage has never been easy. As if the state of homeownership wasn’t grim enough, the recent rise in home prices across the country has led to an unexpected and alarming consequence: the rise of “zombie mortgages.” These are old, unpaid mortgages that many homeowners thought were long dead but have now come back to life , haunting their current financial situation. Here’s what you need to know about these so-called zombie mortgages and what you can do to combat them.
What is a zombie mortgage?
Zombie mortgages typically arise after the 2008 financial crisis. During this time, many banks chose not to complete foreclosure proceedings on delinquent loans due to low property values and high costs associated with foreclosure. These loans were often written off or apparently abandoned. However, as property values have risen sharply in recent years, debt collectors have begun to revive these dormant debts, seeking to capitalize on increased equity in homes.
For homeowners, the sudden reappearance of old debt can be shocking and financially devastating. Many are faced with large, unexpected bills for unpaid principal, interest and fees that have accumulated over the years. This situation is especially troubling for those who have worked hard to rebuild their lives and credit ratings but are faced with the specter of past financial problems.
What to do if you encounter a zombie mortgage
If you’re being stalked by a zombie mortgage, here are some steps you can take to protect yourself:
1. Don’t ignore the problem. While it may be tempting to dismiss these claims as unlawful, failure to respond may result in a default judgment being entered against you. Take any messages from debt collectors seriously.
2. Gather all relevant documentation. Gather all documents related to the initial loan, collection proceedings, and follow-up communications. This information will be critical in determining the validity of the debt and your potential liability.
3. Request a detailed report. Ask the debt collector to provide details of the claimed debt, including principal, interest and fees.
4. Seek help from a lawyer. Consult with an attorney who specializes in debt collection and foreclosure. They can help you navigate the complex legal situation surrounding a zombie mortgage and advise you on the best course of action.
5. Check the statute of limitations. Be aware of debt collection deadlines in your state. If the statute of limitations has expired, you may have grounds to dismiss the case.
6. Know your rights. Review the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices. If you believe that a debt collector has violated this law, you can file a complaint with the Consumer Financial Protection Bureau.
7. Consider negotiation. In some cases, you may be able to negotiate a settlement for a portion of the amount claimed. Your lawyer can help you determine whether this option is viable.
8. Study the chain of ownership. Sometimes the ownership of these old loans can be unclear. Ask the debt collector to provide clear evidence of his right to collect the debt.
9. Be careful when making payments. Making even a small payment on an old debt can sometimes restart the statute of limitations. Please consult with your attorney before making any payments.
10. Stay on top of your credit report. Check your credit report regularly to make sure zombie debt is not being reported incorrectly.
For those currently struggling with mortgage payments, it is critical to be proactive to avoid potential foreclosure and creating a future zombie mortgage. Contact your lender to discuss options such as loan modification, deferment or refinancing. Many lenders offer hardship programs that can help you avoid defaulting on your loan.