BACK FROM THE DEAD
‘We’re gonna lose our house’ tearful homeowner concedes after ‘Zombie mortgage’ came back to haunt family years later
An investor has issued a warning to homeowners with "defunct" second mortgages
A COUPLE fear losing their home of 18 years despite having paid their mortgage on time.
Sophiea and Andre Lipford from Alexandria, Virginia fell foul of what is known as a "zombie mortgage."
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After bringing up their children in their home of 18 years, the couple learned that their home was up for sale.
"I saw this foreclosure letter and I just panicked and started to cry," Sophiea told NPR.
"We're gonna lose our home," the surgical technician said.
A debt collector had revived their dead mortgage loan from decades ago by purchasing it.
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This is known as a zombie second mortgage where the collectors add on huge fees and interest which can lead to property foreclosures.
Millions of homeowners who got modifications to their mortgages during the 2008 housing crash are seeing dead loans come back to haunt them.
"This really is a problem," Andrea Bop Stark, a National Consumer Law Center attorney told the news outlet about zombie second mortgages.
The attorney noted that with liens recorded on properties with such mortgages, foreclosures are an easy process.
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In New York over the past two years, at least 10,000 zombie second mortgages were linked to foreclosures, according to NPR, and they all dated back to between 2004 and 2008.
"The numbers to me are very scary," Stark said.
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In a warning to homeowners who had second mortgages, David Gordon, co-founder of ARC Private Equity said that investors are "waiting on the sidelines" to collect on them.
Gordon who has bought up lots of dead mortgages explained his point of view to NPR.
"An investor deserves to make their money back and there is real money at stake," he said.
While numerous homeowners who have become victims of the zombie loans claim that they were told the second mortgage was waived, Gordon explains that this is common but often not true.
"They still exist," he said of many cases.
"It's not like they went away. People were waiting on the sidelines to collect on those at some point."
What is a zombie mortgage?
A zombie mortage is a mortgage debt that was believed to have been forgiven or satisfied a long time ago, but still exists.
These old debts can be written off by the lender and sold, oftentimes for pennies on the dollar, to debt collectors.
Sometimes, mortgage companies will stop sending payments and homeowners believe the debt is dead.
However, debt collectors come years later to collect on the debt.
As property value rises, debt collectors threaten foreclosure and other collection actions while asking for the outstanding balance - plus fees and interest.
Source: Consumer Finance
With house prices now soaring, foreclosures see properties sold for much less than they are worth.
"Nothing is free in this world, and if you signed up for a loan, you know what you signed up for," Gordon said.
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"It is what it is."
Meanwhile, other homeowners are finding themselves trapped in their homes due to their mortgages in what is known as a "golden handcuff" situation.