Night Of The Living Mortgage – The Foreclosure Crisis Hits A New Low

Just when we think we’ve seen every possible mess dealing with the mortgage meltdown, a new issue appears as if out of nowhere:

The Zombie Title

Here’s how it works: people walk away from their mortgage, or are foreclosed upon and evicted from their house, and then the bank doesn’t finish the foreclosure. This results in a housing title which is, for all intents and purposes, the walking dead. Because the foreclosure is not completed, the bank does not take control of the house title, leaving it in the hands of the people who were foreclosed upon. As a result, these people find themselves, sometimes years later, hit with unpaid tax penalties, liens; even jail time.

This is happening all across the country.

As Reuters has reported, banks are walking away from foreclosures instead of completing the process. This leaves the former homeowners on the hook for any costs.

According to numbers from RealtyTrac, of the 10 million foreclosures filed since 2006 when the mortgage crisis began, approximately 20%, one-in-five, never exited the foreclosure process. Some were caught up in the robo-signing scandal while others were left to live in their houses gratis. But many others have fallen into this “zombie title” trap; neither fish nor foul: those do not legally own their homes but remain responsible for them. And due to the banks walking away, the previous homeowners may never know about the issue until time has passed and penalties have accumulated.

And the worst part is, the banks can write off the losses, making them practically free. Due to the intricacies of tax codes, the banks lose next to nothing from walking away. They are not on the hook for taxes, maintenance, any of it; they pocket the losses and walk away. Then the former homeowners are hit with the penalties, such as being required to bring homes neglected for years up to city code. Homes which had squatters, damage from the weather, and general failure are required to do routine maintenance, with tens of thousands of dollars in damage. The cities, towns and munincipalities seek out, and levy, penalties on the former homeowners, not the banks. And then the debt collectors can make things even worse for people who are already struggling to salvage their lives, continuing the foreclosure crisis with this new added horror.

The foreclosure settlement did not address this issue, because nobody had realized the banks were walking away from the foreclosure mid-process, leaving the homeowner holding the bag. When Reuters asked Joe Smith, the monitor of the National Mortgage Settlement, about the agreement struck between major banks and state attorneys general to address foreclosure abuses, he said:

“To my knowledge, the servicers’ behavior in the situation… is not covered by any standards in the Settlement.”

This is an ugly situation, and it is getting uglier by the day. The more Congress fails to act, the worse it will become. Of course, the GOP would rather rename NASA facilities, or pursue meaningless repeal attempts rather than actually helping the American people. Perhaps that is their new Ryan plan after all. Who are we kidding, they are less popular than root canals. They likely won’t even vote for deficit reduction if it actually helps people.

The culture of greed has all but destroyed this country. There are those who continue to cling to it, to the lie that selfishness is a virtue. Greed is not good, it is corruption itself. It rots you to the core, and leaves you empty inside. Greed got us into this mess, only generosity, and pulling together will get us out of it.

Nathaniel Downes is the son of a former state representative of New Hampshire, now living in Seattle Washington.
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