FAQs
Introducing: the “zombie mortgage.” These aren't creatures from the underworld, but mortgages that homeowners forgot about or lenders said they would write off, but didn't, only to reappear years later, according to the Consumer Financial Protection Bureau.
How do you tell if you have a zombie mortgage? ›
Check your old tax filings.
Your old tax filings can also give you a clue, as "forgiven loans are generally taxable," said U.S. News & World Report. So "if you didn't receive a 1099 indicating the amount of debt that the lender forgave, you could have a zombie mortgage."
Do zombie mortgages show up on a credit report? ›
If you have a negative item on your credit report, such as a collection or late payment, a collector can report it to the credit bureaus for up to seven years. However, if you make a payment on a zombie debt or agree to do so, the collector can report the debt to the credit bureaus, restarting the seven-year clock.
How to get rid of a zombie mortgage? ›
How to pay your 'zombie mortgage' now
- Pay off the debt by leveraging your home's equity.
- Try to negotiate a settlement with the lender.
- Dispute the validity of the "zombie mortgage" debt.
- File for bankruptcy protection.
Key Takeaways
There is no legal obligation to pay back zombie debt, but debt collectors can be aggressive and unscrupulous in their attempts to get people to pay.
How to protect yourself from zombie mortgages? ›
Homeowners can take several steps to protect themselves from zombie mortgages:
- Regularly Check Mortgage Records: Keep an eye on your mortgage statements and records to ensure there are no unexpected claims or notices. ...
- Stay Informed About Your Debts: If you had a second mortgage or any old debts, confirm their status.
Under California's Code of Civil Procedure § 337, the statute of limitations for these debts is four years, starting from the date of the first missed payment.
Can I be sued for zombie debt? ›
Zombie debt No 2: Debts outside the statute of limitations
As long as a debt you owe is within the statute of limitations, you can be sued in court for not paying. However, attorney David Aylor says a zombie debt can't hurt you if the statute of limitations window has closed.
How does a zombie mortgage happen? ›
How Do Zombie Mortgages Happen? There are a few scenarios that can birth a zombie mortgage. Homeowners modified their first mortgage without realizing that their second mortgage wasn't part of the deal. The borrowers thought they only had to pay the first mortgage.
How many zombie mortgages are there? ›
As those numbers keep dwindling, the biggest decreases from the first quarter to the second quarter of 2024 in states with at least 50 zombie homes are in Ohio (zombie properties down 22 percent, from 597 to 466), Maryland (down 17 percent, from 104 to 86), South Carolina (down 14 percent, from 74 to 64), California ( ...
As a ghost mortgage is still a form of zombie debt, uncollectible accounts that have been written off can be purchased by a debt buyer for cents on the dollar. The goal of the debt buyer is then to recoup whatever money they can, however they can, and by possibly using unscrupulous tactics as debt collectors.
Can a second mortgage be forgiven? ›
You would have to get the lender to agree to let you pay a portion of the outstanding balance. The lender would then forgive the remaining balance. What Are the Tax Implications of Settling a Second Mortgage? If you settle the debt for less than you owe, you might face tax consequences.
Can a bank foreclose on a second mortgage? ›
Naturally, there are many instances in which the lender of a second or even third mortgage does not receive repayment on their debts. This can occur through foreclosure or even bankruptcy.
How to find out if you have a zombie mortgage? ›
How Can I Find Out if I Have a Zombie Mortgage?
- Any errors or ambiguity in the actual mortgage document.
- Any errors or ambiguity in the actual home title.
- Evidence that multiple mortgages were taken out for one loan.
- Evidence of a home equity line of credit being take out on the home.
Zombie debt refers to long-forgotten or old debts that resurface, often with accumulated interest and fees, threatening the financial stability of unsuspecting homeowners. These debts are frequently sold to new servicers who then aggressively pursue the outstanding amounts, sometimes leading to foreclosures.
How do I know if I have zombie debt? ›
Some of the most common scenarios of zombie debt are the following: Unpaid debts that are beyond the statute of limitations when you can be taken to court for payment. Unpaid debts you owe but forgot about. Unpaid debts wiped out with bankruptcy.
How do I know if I have a reverse mortgage? ›
Go to the recorder's office and see if one was filed. Have an attorney or title company look on the title to the home. Check the real estate records with the county register of deeds. If there is a mortgage on the property, it will have been recorded.
How do I get rid of zombie debt? ›
Things get a bit tricky if the zombie debt is both legitimately yours and you still owe payment. You might try to negotiate a settlement or a payment plan with your creditors. You can attempt to do this on your own, but you can also enlist the help of a debt relief company.
Can I ignore zombie debt? ›
The short answer is “no.” You cannot ignore zombie debt without facing some sort of consequence. That consequence will vary depending on the type of zombie debt that's haunting you.
