What is a ‘Zombie Mortgage’?

For most buyers, mortgages are the cornerstone of purchasing a home. Sometimes a second mortgage is necessary, too, to cover the down payment, for instance. But what happens if that second mortgage seems to have been forgiven but actually still exists? 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.

As home prices continue to soar, zombie mortgages are seeing a “second wave,” said David Weber, a professor at the Creighton University School of Law. (The first wave, he said, occurred after the recession in the fall of 2008.)

“The zombie nomenclature stuck because it was so catchy,” Mr. Weber said. “With these second mortgage issues that are going on right now, it’s not that they’re coming back to life. It’s just that they were laying dormant.”

A homeowner might have no idea that a secondary lender is on the title to their property, Mr. Weber said, and the lender can choose to exercise their rights to the property when it becomes financially viable for them to do so.

Here’s what to know about zombie mortgages and how to protect yourself.

The term originates from the aftermath of the foreclosure crisis in 2008 amid an increase in residential mortgage loans that defaulted, according to Andrea Boyack, a professor at the University of Missouri School of Law. Lenders would start the foreclosure process or announce a default, but never follow up because they didn’t think they would be able to recoup their investment.


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