Special Report: The latest foreclosure horror: the zombie title

[ProblemAgain]

yep, the banker is your friend...seems like banks are allowed to walk away from their decisions...

Six years in, thousands of homeowners are finding themselves legally liable for houses they didn't know they still owned after banks decided it wasn't worth their while to complete foreclosures on them. With impunity, banks have been walking away from foreclosures much the way some homeowners walked away from their mortgages when the housing market first crashed.

"The banks are just deciding not to foreclose, even though the homeowners never caught up with their payments," says Daren Blomquist, vice president at RealtyTrac, a real-estate information company in Irvine, California.

Since 2006, 10 million homes have fallen into foreclosure, according to RealtyTrac, a number that in earlier, more stable times would have taken nearly two decades to reach. Of those foreclosures, more than 2 million have never come out. Some may be occupied by owners who have been living gratis. Others have been caught up in what is now known as the robo-signing scandal, when banks spun out reams of fraudulent documents to foreclose quickly on as many homeowners as they could.

And then there are cases like the Kellers, in which homeowners moved out after receiving notice of a foreclosure sale, thinking they were leaving the house in bank hands. No national databases track zombie titles. But dozens of housing court judges, code enforcement officials, lawyers and other professionals involved in foreclosures across the country tell Reuters that these titles number in the many thousands, and that the problem is worsening.

"There are thousands of foreclosures in limbo, just hanging out there, just sitting, with nothing being done," says Cleveland Housing Court Judge Raymond Pianka, whose pending court cases tied to derelict properties have doubled in the past two years, to 1,000. He says the surge is due largely to homes vacated by people who fled before an imminent foreclosure sale, only to learn later that they remain legally responsible for their house.

When people move out after receiving a notice of a planned foreclosure sale and the bank then cancels, municipalities are left to deal with the mess. Some spend public funds on securing, cleaning and stabilizing houses that generate no tax revenue. Others let the houses rot. In at least three states in recent months, houses abandoned by owners and banks alike have exploded because the gas was never shut off.

THREAT OF JAIL

Unsuspecting homeowners have had their wages garnished, their credit destroyed and their tax refunds seized. They've opened their mail to find bills for back taxes, graffiti-scrubbing services, demolition crews, trash removal, gutter repair, exterior cleaning and lawn clipping. At their front doors they've encountered bailiffs brandishing summonses to appear in court.

In some cities, people with zombie titles can be sentenced to probation - with the threat of jail if they don't bring their houses into compliance.

"These people have become like indentured serfs, with all of the responsibilities for the properties but none of the rights," says retired Cleveland-Marshall College of Law Professor Kermit Lind.

Banks used to almost always follow through with foreclosures, either repossessing a house outright — known in industry parlance as REO, for real estate owned — or putting it up for auction at a sheriff's sale. The bank sent a letter notifying the homeowner of an impending foreclosure sale, the homeowner moved out, the house was sold, and the bank applied the proceeds toward the unpaid portion of the original mortgage.

That has changed since the housing crash. Financial institutions have realized that following through on sales of decaying houses in markets swamped with foreclosures may not yield anything close to what is owed on them.

By walking away, banks can at least reap the insurance, tax and accounting benefits from documenting the loss — without having to take on any of the costs and responsibilities of ownership, according to a 2010 Federal Reserve paper. A walk-away also enables them to "sell the unpaid debt to debt collectors, sometimes noting to the court that the loan has been charged off," according to a Case Western Reserve University study released in 2011.

No regulations require that banks let homeowners know when they change their minds about a foreclosure. So they rarely do, according to housing court judges, homeowners' lawyers and academics who study foreclosure problems. "The banks do not answer inquiries, they do not answer phone calls, they do not answer letters," says Judge Patrick Carney of the Buffalo, New York, Housing Court. His zombie-title caseload has swollen in the past few years to well into the hundreds. "The whole situation is surreal," he says.

http://www.reuters.com/article/2013/01/10/us-usa-foreclosures-zombi...

[Ioruach]

Danielle Douglas of the Washington Post reports that the Consumer Financial Protection Bureau is issuing additional regulations to tighten mortgage lending rules.  Banks took full advantage of lax lending rules to approve mortgages to people who often had no way to make the payments.  So the housing market went into the tank.  Now those same banks fail to make the effort to help their borrowers find ways to retain their homes by providing alternative payment methods and otherwise assisting their borrowers.   And Republicans oppose tighter regulations on banks and their lending practices?  It’s a damn shame.

[ProblemAgain]

and you would think that if they were NOT going to auction the property off, they would at least notify the 'legal owner' so that person could attempt to mitigate what financial damage to them is to ensue. that would, of course, be the honorable thing to do..

[P.A.]

If the honorable thing does not make them any money to heck with it.

[ProblemAgain]

oh you're right....whatever was i thinking....the same banks that laid off thousands upon thousands of mid and lower level employees and then awarded the execs bonuses for their cost-cutting (i e laying off thousands upon thousands of employees)