How Judges Can Help Prevent Zombie Foreclosures

According to RealtyTrac, 25 percent of foreclosures in the U.S. are “zombies” – homes with no clear ownership of title. This happens when the owner has vacated the property, but the lender has not yet closed the case and taken over ownership. During this period of unclear ownership, the property falls into disrepair and hurts the value of surrounding homes in the neighborhood.

Zombie mortgages can be found all over the country, but the hardest hit states are Illinois, Ohio, New York, New Jersey, Florida, and California. While there are laws in some states that shorten the foreclosure process for an abandoned property, improved judicial supervision is also needed to oversee mortgage-foreclosure cases and prevent zombies. In the interest of advancing cases, a judge could, for example, require periodic meetings with attorneys handling foreclosure cases for lenders to ensure progress.

So why do some foreclosures move so slowly that they end up as zombies? Unlike other types of litigation, foreclosure litigation involved post-judgment steps that must be completed before the case can come to an end. The judgment alone does not end the case. When the judge does not make sure that the post-judgment steps are actually taken in a timely manner, the case can come to a standstill.

One might think there would be certain incentives in place to encourage mortgage-servicing companies and lenders to bring foreclosure cases to induce loan payoff, but this goal isn’t always achieved. Lenders know that bidders at a post-judgment auction sale are unlikely to bid high enough to cover their losses on a home in a distressed neighborhood. Instead of making themselves responsible for another bank-owned property that they will have to repair, maintain, and attempt to sell, some lenders will allow cases to linger. It is at this point that the intervention of a judge is critical. The judge should take action to compel the lender to advance the case by scheduling an auction sale. If the home still does not sell, the lender should be made to dismiss the case, satisfy the mortgage, and remove the litigation cloud on the title. Ultimately, if the lender initiates a foreclosure, they must be held accountable by the court to complete the case.

Courts in Cuyahoga County, Ohio and Milwaukee County, Wisconsin are among the counties working to enact change to ensure that foreclosure cases are completed in a timely manner. Hopefully, other counties throughout the country will soon also follow this example.

If you are facing foreclosure on your home, Atlas Consumer Law can help. Please call out Chicago foreclosure lawyers today to schedule a consultation.

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