Wednesday, February 20, 2013

Zombie Foreclosures

It has been an unfortunate sign of the times. In the past few years, there have been a record number of foreclosures in the United States in the past few years.
Perhaps as many as 8 million by some estimates. A stark reminder, and an all too familiar story indicating American dream's deferred. For many it represents a chance to start anew. A chance to reassemble the broken pieces of their lives using hope, faith, and effort in order to restore their lives.. So imagine the unfathomable surprise experienced by many, once they discovered that the nightmare just won't end.
Borrows are discovering that their foreclosed homes are coming back to haunt them long after they've moved out.
In these "zombie foreclosures," borrowers move out after their bank schedules a foreclosure auction only to learn months or even years later that the auction never took place or the bank never transferred the deed. That means the borrower still technically owns the house and is on the hook for property taxes, fees and homeowners' association dues. In essence, the foreclosure never dies.
Since the housing bubble burst seven years ago, almost two million properties have started but never completed the foreclosure process, according to RealtyTrac, an organization who's sole purpose is to track real estate trends. While no one knows the exact number, it's estimated that tens of thousands could be zombie foreclosures.
The vast majority of these homes are in low income communities where foreclosed homes are so difficult to sell that some lenders delay taking possession to avoid paying taxes, and other costs associated with owning the home. As a result, the home, taxes, fees, and costs stay under the borrowers name long after the premises has been vacated. Causing the borrower to unknowingly accumulate massive debt, driving their credit scores even lower, and making life after foreclosure that much more difficult .

Rose Nathan, a 37-year-old office manager lost her home in South Bend, Indiana in 2009. Nathan made an agreement with CitiMortgage to voluntarily walk away from the property,deed-in-lieu deal. The bank then told her that she had to move right away because the home was about to be sold at auction.
Nathan sold her belongings and moved to Hawaii. Nearly two years later, she received a property tax bill from the City of South Bend for the amount of
$5,000. The bank had never taken possession of the house.
Citi told her attorney, Judith Fox, that the holdup was due to a lien on the home that they were never told about. Nathan said she knew of no liens at the time of the transaction. Upon doing a title search, Fox found no evidence of a lien until well after the bank agreed to the deed-in-lieu deal.
As as result of the banks dirty dealings and dubious intentions, Nathan's credit score took a tremendous hit, dropping between 80-120 points. The companies who issued her credit cards cut her off even though she was making her payments, and the interest rate on her auto loan is now a whopping 25%. The only housing Nathan could afford is a 1 bedroom apartment where she lives with her 3 children. Nathan said she has since paid off the lien with the hope that Citi will take the deed on the home.
This is a classic story of corporate greed. Despite having received hundreds of millions of tax payer dollars from the government, CitiMortgage, a subsidiary of Citibank, one of the largest banks in the world, still insists on "sticking" it to average American citizens, just to save a buck. The shear absurdity of this story makes my blood boil, especially given the fact that although never documented one of the major caveats in the government bailout required that financial institutions be more accommodating to borrows. But the nightmarish reality is the fact that these humongous sometimes soul crushing institutions took the money and ran.


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