What is a zombie 2nd mortgage? Jun 24 2024 06:42PM more by lamar
Tags: Random
"Zombie" mortgages are mortgage debts that you might have thought were forgiven or satisfied long ago but that still exist.
Old debts can be written off by the lender and sold for pennies on the dollar to debt collectors. Sometimes the mortgage company goes silent and stops sending statements or communicating with you altogether. Years later, a debt collector reaches out to collect on the debt. Because these mortgages seem to reappear after being considered "dead" or gone for so long, they're sometimes called "zombie" second mortgages.
Why did some borrowers have second mortgages on their homes?
Before the Great Recession in 2008, mortgage lenders sometimes gave borrowers two mortgages for the same property, instead of one. For example, a primary mortgage (recorded in the courthouse first) might cover 80% of the purchase price, and a second mortgage (recorded in the courthouse after the first mortgage) covered the remaining 20%. Sometimes the second mortgage was taken out as a home equity loan after the house was purchased.
As the Great Recession hit and home values shrank along with the economy, some people had trouble making mortgage payments. When a borrower defaults on a second mortgage, the mortgage holder can sometimes start foreclosure even if the borrower is current on the first mortgage. But, for business reasons, some second mortgage holders charged off their defaulted loans as uncollectible and stopped communicating with borrowers. Some sold the loans to debt buyers without telling the borrower. Some borrowers, because they received no notices or periodic statements for years, thought their second mortgages had been modified along with the first mortgage, discharged in bankruptcy, or forgiven.
Now, years later, as borrowers have paid down their first mortgages, some are hearing from companies that say they own or have the right to collect on a long-dormant second mortgage. As property values rise, mortgage holders who bought these second mortgages-and their debt collectors-are threatening foreclosure and other collection actions. Some of these debt collectors demand the outstanding balance on the second mortgage, plus fees and interest, and some threaten to foreclose if the borrower does not or cannot pay.
These 1sts or 2nds have a deed of trust on the title report, which will stop the homeowner from re-fis or from selling the property. The homeowner can file a "quiet title" civil court case to get rid of the trust deed. Those can take several months to clear, and you would probably need to hire a RE attorney to handle it.
Send me 999 points and I'll send you a copy of a letter I send to Collections.
Hint, it asks for records they do not have to hold against you and they walk as it has to be open to a viewing court. Sometimes it gets resold to another collection, just do the same thing.
This is going to be more common as more default on loans.
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Also, Regulation Z of the Truth in Lending Act requires companies to send monthly statements for any interest assessed on a mortgage. If they fail to do so then they don't have a claim to the property.
Every time a property Is bought or sold (or refinanced) a title search is done.
No lender in their right mind would finance ANYTHING without having recourse - you don't own the property that's been financed by other people's money until you paid it off in full with all principal, interest and any other charges.
Shame on any new lender that might be lazy and not do a proper title search.
Homeowners might not know the process, but for all counties in CA that I'm aware of, you can look up this info on line for free.
The video is likely bull crap, officers do not just show up giving you five minutes to leave.
Formal notice needs to be filed and documented - it's quite a lengthy process.
CA law strongly favors the resident over the lender in virtually all situations.
Notices need to be ignored, posting on the doors need to be ignored, communication needs to be ignored to get to the point of absurdity for this to happen.
