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Law firm warns of Zombie Titles and Zombie Deeds

January 26, 2013

Scura, Mealey, Wigfield & Heyer, LLP a New Jersey law firm has issued a press release via 24-7pressrelease readable at DigitalJournal: ““Zombie Titles” Terrorizing Some Homeowners“, explaining:

What makes a zombie title?

In many cases, when homeowners receive notice that their lenders intend to foreclose on their mortgages, they vacate their houses and find other places to live prior to the completion of foreclosure. Due to the glut of foreclosed homes that banks already owned and the difficulties they were having selling them, banks began to drop foreclosure actions they started before the foreclosures were complete.

Many banks reasoned that paying the taxes and upkeep on the houses while waiting for them to sell was too expensive and did not want to be responsible for these costs. Other lenders calculated that the money they would get for many houses was less than the insurance, tax and accounting benefits they would get from counting the mortgage as a loss. Banks also have the ability to sell these unpaid debts to collectors.

The result is that homeowners who thought they had lost their houses to foreclosure still own the properties because their names were never removed from the deeds by foreclosure — and they are not aware of it. Industry experts are calling these deeds “zombie deeds.”

The press release goes on to explain how these zombie deeds can can negatively impact the owners, incurring costs, garnishing wages or being denied social security disability benefits because of asset restrictions and advises readers to seek experienced debt relief attorneys.

That said, I expect most of the people in this situation are rather poor off and cannot particularly afford to pay for these legal services…? Is the idea here to instigate process forcing banks to foreclose? Or maybe raising the price of title insurance?

Recall ZombieLaw previously mentioned the issue of Zombie Titles in “Magical realism in business and real estate” referring to an article about zombie title by Michelle Conlin of Reuters.

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