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These zombies don’t walk at night or try to eat people’s brains except metaphorically speaking. These are foreclosed homes that have come back to haunt people years after they moved out of the house. What happens is that borrowers leave the house after a foreclosure auction was scheduled by their bank. Then months or even several years later, they learn that there never was an auction or that the deed was never transferred. So, the homeowner still owns the house, at least technically speaking, and is liable for fees, homeowners’ association dues and property taxes. Ouch!
Why does this happen?
This happens mostly in communities of economically priced homes where it’s tough to sell foreclosures. As a result, lenders sometimes want to reduce costs and taxes so they postpone taking legal ownership of the home. As a result, it stays under the borrower’s name.
It can damage your credit score
Let’s suppose you moved out of your house and 24 months later received a property bill from your city in the amount of $4,500 because the bank had never taken legal possession of the house. An unpaid debt like this could just crush your credit score. In fact, I read of one case where a woman was never told that the house still had a lien on it and didn’t discover this until long after the bank had approved a deed-in-lieu deal. This lowered her credit score probably by 120 points. Since the debt is still unpaid, her credit kept getting hit. Her credit card companies ultimately canceled her cards even though she was paying on them every month. And her auto loan now has an interest rate of 25%.
It can be even worse
I ran into an even worse story. It was about a father of two who lost his home four years ago. Several years later, a debt collector called him saying he owed $70,000. It was because the company that held his second mortgage had never forgiven the debt. This can happen when the foreclosure sale doesn’t yield enough cash to pay off the second mortgage as well as the first, making it possible for the second mortgage holder to sue the homeowner to pay off the note even after they have lost their home in a foreclosure.
What to do if a zombie foreclosure is stalking you
The worst part of this story is there’s not a great deal you can do if you are being stalked by a zombie foreclosure. You could go to a community advocacy group like one affiliated with NeighborWorks America and the NCRC (National Community Reinvestment Coalition) for credit counseling. These two organizations have a lot of experience helping borrowers who are in trouble and charge nothing for their services.
Debt settlement could help
It’s also possible that debt settlement could help. This is where a company such as National Debt Relief contacts the holder of that zombie debt and negotiates a settlement for much less than is owed. For example, National Debt Relief might be able to chop that $70,000 in debt down to $35,000 or even less. We charge nothing until we have successfully settled your debt and provided you with a payment plan you approve. Don't let zombie debt or any other type of debt continue to stalk you. Contact us today for more information.