There is now another new term in the evolving real estate market and a very colorful one. We have all seen the homes around town that have been in foreclosure for years. They now have a name, “Zombie Foreclosures”. These are properties in which banks may have begun the foreclosure process on a home, contacted the homeowners about it, but then later abandoned the foreclosure process. The homeowners may have already moved out, at which point the property sits vacant with no one claiming responsibility for the upkeep, mortgage, taxes, HOA dues or in some cases code violation fines.
Thousands of borrowers nationwide own zombie homes but may not realize it, but Florida tops the list. One reason that states such as Florida have a high number of zombie foreclosures is because of the long foreclosure process in our state. People tend to abandon their property when the process drags on and on. For example, it takes 893 days on average to complete a foreclosure in Florida.
In other cases, the property may have been caught up in the robo-signing scandal and the foreclosure cannot be completed. Or there may be other reasons that the lender simply doesn’t follow through with the foreclosure, such as they already have too much inventory, the costs of foreclosing do not justify completing the foreclosure, or in some cases, maybe the paperwork was simply lost.
At a recent Federal Reserve Bank of Cleveland Conference the Consumer Finance Protection Bureau, announced that the CFPB is beginning to look very closely at abandoned properties and zombie foreclosures. A department chief stated “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, (they) find out that they are (the owner); that there was never a foreclosure, and they have large financial responsibilities that they never knew about.” For these property owners this can truly be a grisly horror story.