As of February 2015, RealtyTrac reported that 25 percent of all active foreclosures were zombie foreclosures. The Consumer Finance Protection Bureau (CFPB) is considering taking action because they see the rates of zombie foreclosures as a large enough issue that might hurt the market. Daren Blomquist, the vice president at RealtyTrac, said, “While the number of vacated zombie foreclosures is down from a year ago, they represent an increasing share of all foreclosures because they tend to be the problem cases still stuck in the pipeline.”
So, what is a zombie foreclosure? A foreclosure is categorized as “zombie” when a property is vacated by the homeowners prior to the bank repossessing it. This occurs when a bank begins a foreclosure but then abandons it and fails to alert the homeowners that they are still responsible for that property. Often times, the borrowers, or the owners, are under the impression that the property has been foreclosed because they receive a notice and they then move out but later come to find out the lender never followed through on their foreclosure. So, in theory, the borrower still owns the property. They may have moved to another house but they are unknowingly accruing interest, penalties, maybe even liens, on the property which can lead to large financial deficiencies building up without the owner being aware.
The CFPB has previously communicated ideas to help resolve the zombie foreclosure issue. According to Michelle Conlin’s article CFPB Targets “Zombie” Foreclosures After Reuters Report, some of the CFPB’s ideas include, “creating a national definition of ‘abandonment’, hastening the foreclosure process so vacant homes can more quickly be transferred to potential owners and non-profits, and creating a national registry of zombie properties.”
In the meantime, zombie foreclosures continue to be an issue and take over the market. Daren Blomquist of RealtyTrac admits, “The states where overall foreclosure activity has been increasing over the past year — counter to the national trend — tend to be states with a longer foreclosure process more susceptible to the zombie problem.”
The five states that reported the most zombie foreclosures, as of February 2015, were Florida, New Jersey, New York, Illinois, and California. At 35,903 zombie foreclosures, Florida had the highest number of any state and they accounted for 26 percent of all foreclosures in Florida. The state with the second highest amount of zombie foreclosures was New Jersey at 17,983 which was an 109 percent increase from a year ago. New York had 16,777 zombie foreclosures, representing 19 percent of all residential properties in foreclosure while Illinois had 9,358 and California had 7,370 zombie foreclosures.
If your property was foreclosed but you have any doubts about the process not being completed or you see a property that looks like its abandoned, it may be worth determining whether or not that property was actually foreclosed by the bank or still owned by the prior borrower. Examining the land records or running a title search on the property could inform you if a foreclosure was completed or not. If you have any questions regarding this subject you can reach us at our website at www.titlesearch.com.