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Zombie Foreclosure Update

July 13, 2014

Herald-Tribune: “Turning ‘zombies’ into homes” By Adam Tebrugge:

we are in the midst of an ongoing humanitarian crisis that affects us all. We cannot continue to allow our citizens to sleep in the streets when there are numerous vacant properties throughout the area.

Tebrugge is responding to Josh Salman’s articles on zombie homes and homelessness. Another response letter published by the Herald-Tribune in their “Friday Letters“, sent from Jack Kent:

I would like to applaud Josh Salman for his outstanding article, “Is that a zombie on my block?” The financial meltdown was tragic, but it is appalling that the problem continues to plague us years later. The national banking conglomerates that created the financial meltdown still are not taking effective action to clean up the disaster they created.

Meanwhile in HousingWire: “A response to zombie properties” by Robert Klein blames the court process:

I think that common sense would tell us that the first step should be developing a way to expedite the foreclosure process for homes that have been abandoned.

Ok, but that “common sense” could also do a lot of harm to people who might need the protection of the courts. The assumption that all zombie foreclosures are vacant properties and causing blight is WRONG. This is the RealtyTrac rhetoric incorporated by AG Scheidernman and others but it’s only partially true. Vacant homes are a problem for the neighbors and the community but we could get the owners back in the homes if the banks would negotiate at terms reasonable to the fact that the recession hurt everybody. They got government bailouts and years of low interest rate money. It’s time to help the homeowners, not speed foreclosures. Unless the homeowners are ready to give it up, then quit claims, the banks shouldn’t be allowed to stall, but can’t blame the courts there either.

A similar use of “zombie foreclosure” in Fresno Bee “Real Estate Blog: Few zombie foreclosures in Fresno” by BoNhia Lee also accepts the RealtyTrac definition of zombies as only the vacant properties but note the numbers:

California only had 4,243 vacant houses out of the 50,567 foreclosures statewide.

At the beginning of the foreclosure crisis, homeowners were quick to leave their homes, but many now stay to work with banks on loan modifications

Ok so more are staying but are the banks just delaying? Are they negotiating in good faith or letting the defaulted mortgage debts keep rising as phantom debt that they sell around to unsuspecting buyers. Probably they continue to sell these notes between banks and as bundles of packaged securities with hopes that one day the laws will change and they can actually enforce these junk securities. All of these properties should be considered “zombie foreclosures” and the government should force banks to give these homeowners reductions on principal and interest rate and force the banks to make these defunct mortgages into performing loans at the current market.

Florida accounted for more than one-third of all zombie foreclosures nationwide with 48,630 vacated homes out of its 195,183 foreclosures. New York, New Jersey, Illinois and Ohio rund out the top five.

Even 25% is not the bulk of the foreclosure crisis, and are they all really vacant? Doesn’t everyone leave Florida in the summer? Are some of these second-homes and even so, shouldn’t we want to get homeowners back into them? And also what of all the defaulted debt not now in foreclosure action but with banks lying in wait? We need a registry and some laws that force quit claims and bank responsibility?

Lohud: “Zombie homes continue to gather weeds and community ire” by Barbara Livingston Nackman:

the proposed Abandoned Property Neighborhood Relief Act didn’t make it to discusion in Albany. It will have to wait until January when a new legislative session begins, officials said.

“We are not going to tolerate these ‘zombie‘ properties in our neighborhoods any longer,” added Sen. David Carlucci, D-Clarkstown, who is particularly pleased that the proposal includes a $1,000-a-day fine to lenders who do not comply with clean-up.

At the Daily News Online: “Editorial: The ‘zombie’ law“:

When the state Legislature reconvenes this fall, one bill it should make sure it acts upon is the so-called “zombie” law. Attorney General Eric T. Schneiderman’s proposed law would give municipalities needed tools for dealing with abandoned properties that create problems in neighborhoods across the state.

Mr. Schneiderman’s “zombie” legislation would require lenders to care for the property throughout the foreclosure process. It would create a statewide registry of abandoned properties so local officials have that information, and would also create a toll-free hotline so residents can report suspected vacant properties. Further, it would require that homeowners be notified that they are legally entitled to remain in their homes until ordered to leave by a court.

The New York State Conference of Mayors has come out in support of the legislation.

Long Island Exchange: “Rep. McCarthy and Mayors of Newburgh and Utica Endorse Eric Schneiderman for Re-Election“… obviously…

But let’s see how next legislative session goes before we don him as the next democratic gubernatorial candidate after Hillary taps Andy for veep or secretary something… this Abandoned Property bill (A9341) sounds great in sound bite but will it have enough bite to get banks actually negotiating with the named homeowners or will this only address a small percentage of vacated homes? How can we get the homeowners back in their homes at a rate reasonable to the reality of the recession that everyone faced together? In some cases the banks induced the owners to default with promises of negotiation but still never fairly negotiated. Speeding court processes will not help to guarantee those homeowners protections.

Also from Batavia Daily News: “ State ‘Zombie Law’ on council’s agenda Monday” By Joanne Beck:

The relief act — nicknamed the Zombie Law — would especially help to assign responsibility to lending institutions for such properties. Up to now, those businesses have not been accountable until a lengthy, several month process is complete.

We can hope, but is that really what it does? Have any of the councilmembers read the bill? Even if they have, do they really know what it means? Does anyone? With legislators on hiatus it’s easy to advocate last year’s bill with a fun “zombie” name, but is this a real potential law or political horseshit? Baby steps are good, but how about we spend the summer advocating for a bill with actual teeth?

And see KRIStv: “‘Zombie Homes’ Invading the Coastal Bend?“:

They’re called zombie homes, because they’re in limbo, between the bank and the new owner.

Foreclosures are supposed to take 3 months, but when the banks won’t break even on a sale, they sometimes sit in limbo. The homes are then not for sale and not occupied. The result; they sit empty for months. Montalvo specializes in the foreclosure market. “The government doesn’t want to just release all these houses and depress the market,” he explained.

because of the rats, but also the potential for vagrants.

It’s the banks, it’s the government, it’s the vagrants, blame everybody! Hint: it’s the banks.

InsuranceNewsNet: “‘Zombie Foreclosures’ haunt housing market” by Greg Stiles:

As neighbors go, “Mr. Bank” isn’t a good one, failing to maintain his yard, ignoring a mangled garage door and allowing junk to pile up outside his house. When he does answer the phone, he’s none too talkative.

Over the past 12 months, Poulos has painstakingly compiled documents and telephoned a litany of loan and property servicers, as well as the police, and finally City Hall. Poulos has delayed selling his home because he fears the eyesore next door will scare potential buyers away. He hopes other people with similar issues will take a look at his blog (

In conclusion, banks need to clean up the vacant properties but they also need to negotiate with the rest of the zombies and never let this happen again. Remember this whole crisis was caused by greedy bank fraud and we must never forget that. The banks robosigned exuberance lost sight of real people. Homes are not investment opportunities, they are people’s living spaces. Bring these properties back to life even at the risk of killing more banks. Mark to market today! Turn over all the bad debt; free the zombies!


From → economics

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