CFPB: Zombie foreclosures hurt borrowers

by Ryan Smith19 Mar 2014
The Consumer Financial Protection Bureau is keeping an eye on “zombie” foreclosures, which it worries cause “direct borrower harm,” according to a CFPB executive.

Zombie foreclosures occur when a bank starts the foreclosure process but then abandons it and fails to alert the homeowner. Homeowners in zombie foreclosures have often already moved out of their homes, not realizing that the foreclosures were never completed and that they are still responsible for mortgage debts, upkeep and taxes, according to a Reuters report.

Thousands of borrowers across the country are the unwitting owners of zombie homes, Reuters reported. Many of them are oblivious that their mortgage debts and municipal taxes are continuing to pile up.

“There is direct borrower harm if a borrower believes a foreclosure on their property has been conducted and they are no longer responsible, and months or years later find out that they are, that there was never a foreclosure and they have large financial responsibilities that they never knew about,” said CFPB servicing and secondary markets program manager Laurie Maggiano, speaking at a Federal Reserve Bank of Cleveland conference Tuesday.

The CFPB has received repeated requests from consumer groups to remedy the issue, Reuters reported. Consumer advocates say mortgage servicers aren’t complying with disclosure requirements.

Zombie foreclosures usually occur when low-value properties aren’t worth the bank’s time to foreclose on, Reuters reported. Instead of completing the process, the banks often charge off the foreclosure and walk away.


  • by Debbie Logan | 3/19/2014 7:45:01 PM

    Seriously? Why a person wouldn't follow up on what is happening with their home is beyond irresponsible. First of all they obviously missed several payments. And should be communicating with the lender to determine their options. It may be up in the air whether the lender contacted them or not about stopping the process, if the people don't pick up certified mail are we going to blame the banks? How does that make sense. Foreclosures are posted in newspapers and usually take place as a public auction. And if the lenders do a charge-off usually the IRS sends a 1099 to the homeowner. When do people start taking responsibility for their actions. CFPB has a purpose and there is a definite need for oversight. However, CFPB or the banks are not the parents of the homeowner, if they are responsible enough to purchase a home to begin with then they need to continue with that responsibility which means contacting their lender as soon as they run into trouble financially not bury their head in the sand.


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