After six years in a deep housing recession, thousands of homeowners are stuck in what is called a “zombie foreclosure” — the bank has kicked them out of their house for not making mortgage payments, but their name is still on the title because the banks don't follow through on the rest of the process.
Since the market crash in 2006, some 10 million homes have fallen into foreclosure — a number the
Christian Science Monitor reported would have taken 20 years to reach before the recession. One fifth of those have never been completely resolved.
Regulations currently do not require a bank to notify homeowners when deciding not to move forward on foreclosing on a house, sometimes for lack of resources, confusion, or even compassion.
"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," the Monitor reported.
In many cases, owners move out of their homes when they fall impossibly behind on mortgage payments. Then, the bank announces foreclosure, but does nothing to finish the process. When this happens, municipalities are left to deal with the mess of derelict houses with overgrown lawns, even houses that have exploded because the gas has never been shut off, but the person whose name is on the title may still be responsible.
Some former owners have had their wages garnished, as they are forced to make continued payments on mortgages of houses they do not occupy. Some have had to deal with the threat of legal prosecution.
For the banks, the Christian Science Monitor reports, the advantage is obvious. The banks get the insurance, tax and accounting benefits from documenting the loss — without having to take on any of the costs and responsibilities of ownership. By walking away, banks can also "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.
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