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October 2, 2014

CFPB Ready to Take on 'Zombies'

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CFPB Ready to Take on 'Zombies'

The Consumer Financial Protection Bureau is targeting "zombie" foreclosures, a growing problem where borrowers may unknowingly still own a property that they thought the bank had foreclosed upon.

“Zombie” foreclosures are properties in which banks may have begun the foreclosure process on a home, contacted the home owners about it, but then later abandoned the foreclosure process. The home owners may have already moved out, at which point the property sits vacant with no one claiming responsibility for the upkeep, mortgage, or taxes.

Thousands of borrowers nationwide are owners of zombie homes, but may not realize it, according to a Reuters analysis last year. What’s more, borrowers now may owe thousands of dollars in mortgage debt, as well as face code violations for abandoning the property. Some banks are walking away from foreclosure proceedings because the value of the property is not worth their time, Reuters reports.

"The CFPB is beginning to look very closely at abandoned properties and zombie foreclosures," Laurie Maggiano, the agency's servicing and secondary markets program manager, said at a recent Federal Reserve Bank of Cleveland conference. "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."

The CFPB says it has joined a task force to identify the “hundreds of thousands” of zombie foreclosures across the country, Reuters reports. The CFPB also says that, among exploring other ways to resolve the issue, it would like to create a national registry of zombie properties.

Source: “CFPB Targets ‘Zombie’ Foreclosures After Reuters Report,” Reuters (March 13, 2014)

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