My first reaction to this headline was a lack of sympathy — you borrowed the money, you owe the money. But the details, if true, put me on her side
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So-called 'zombie mortgages' are coming back to life across the US as home prices rise, experts are warning.
In the run up to the housing crash in 2008, millions of Americans took out second mortgages on their homes that they then defaulted on during the crisis.
Lenders didn't pursue foreclosure because the home price crash made it unlikely they would recoup the money. Homeowners often assumed the debt was cancelled.
But these dormant loans are now coming back to life - hence the term 'zombie mortgage'.
The forgotten mortgages had been bought for pennies on the dollar by debt collectors who have patiently waited for house prices to rise to record levels - to make it worthwhile chasing the money.
Now, having tacked on retroactive fees and interest, they are coming to collect the money, and this often means foreclosing on the homes to grab a huge slice of the rise in value.
Karen McDonough, from Quincy, Massachusetts, believed her second mortgage had been written off. That was until she stumbled into a foreclosure auction on her front lawn.
When she had purchased the property in 2005, she had taken out a 80/20 loan, which meant she had two mortgages - one covering 80 percent of the value of the home and another covering the remaining 20 percent. [WTF???!!!]
But two years later, her first mortgage adjusted and the monthly payments were suddenly $700 a month higher.
A year later, McDonough was able to get her loan modified to lower the interest rate and make it affordable again.
“She said her mortgage company told her that as part of the modification, the second mortgage had been forgiven.
She stopped getting statements on the second mortgage and assumed it was dead.
Fast forward to 2022 when a group of men were gathered on her driveway for a foreclosure auction.
McDonough had been receiving phone calls demanding money, but had thought it was a scam.
She claims she was also told by her first mortgage company to ignore the calls as it was most likely fraud.”
It turned out her second mortgage had been sold off to a company within a batch of 600 others, rather than being written off as she had thought.
A few months after the auction, she got an orange eviction notice posted on her front door.
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“One key detail that may be used against debt collectors is that in many cases they are adding years' worth of interest and late fees on top of the amount the homeowner initially borrowed.
“While companies are allowed to do this under federal regulations, they have to send monthly statements to the homeowner detailing the added costs.
“In many cases like McDonough's, homeowners did not receive any information about the loans for years.”
And she is by no means alone.
In New York, NPR found at least 10,000 old second mortgages that foreclosure activity had been initiated on in just the last two years. The loans originated back to during the sub-prime-lending housing bubble of 2004 to 2008.
It also found at least 500 old second mortgages in Maryland where steps towards foreclosure had been taken.
'The numbers to me are very scary,' Andrea Bopp Stark, an attorney at the National Consumer Law Center, told the outlet.
The problem is feared to be widespread across America.
'If you're looking at the number of these foreclosure filings, or at least the attempts to collect on this zombie debt, you're starting to see the numbers tick up dramatically into the thousands, if not more, in individual jurisdictions,' David Weber, a professor at the Creighton University School of Law told The New York Times.
'That's a lot of activity.'
He attributed the increased attention in zombie mortgages to the rise in home prices.
Rising property values build equity into a property, enabling a secondary mortgage holder to make money even after the first mortgage holder is paid, Weber said.
I don’t know whether the original bank’s negligence and misrepresentations can be extended to the secondary lender — they might be, especially if they’re still in business, and many aren’t — but the independent actions of these foreclosure vultures should make them vulnerable to the special defenses of laches (sitting on their cause of action) and unjust enrichment, as well as their failure to comply with federal regulations by neglecting to send monthly bills.
The loan purchasers bought those loans for pennies, and that’s what they should get, if anything.
I’ll note that it was the no-money down mortgages that caused the collapse of the housing market back in 2008, and now Biden and his handlers are bringing that same disastrous formula back; they probably intend to use taxpayer money to pay off the loans just before the next election cycle, just as they’ve done this year with their idiot student constituency.
