'Zombie Mortgages' – thought as long dead home loans – come back to life in the US due to rising real estate prices, warning experts.
In the years prior to the 2008 housing crash, Banks issued risky loans of 80/20, so that millions of Americans can eliminate two mortgages at the same time.
The primary mortgage covered 80 percent of the price of the house, while a second loan – often used for deposits and closing costs – covered the remaining 20 percent. These so-called piggyback loans were popular with first buyers who had no savings for a down payment.
When the large recession struck, Job Loses did not allow millions of homeowners to pay their mortgages, which led to widespread standard values.
Banks often chose to concentrate on recovering the larger main loan instead of the smaller piggyback – loan – because the fall of home values meant that they were unlikely to earn back their money.
“Many borrowers decided not to pay their mortgage or could not do this,” says Kevin Leibewitz of Grayton MortGage. “When real estate values deposited, many houses under water – borrowers were more owed than their house was worth.”
As a result, lenders stopped sending collection knowledge, and many homeowners assumed that their second mortgage debts were forgiven, changed or even dismissed in bankruptcy.
But now, as the housing values rise, banks and debt collectors make these forgotten loans in – Request requirements with years of accumulated interest.
Massachusetts nurse Karen McDonough, for example, was shocked to discover that she still owed money to a 'Zombie -Hypotheek' -17 years after buying her first home.
Karen McDonough, from Massachusetts, believed that her second mortgage had been written off
McDonough came to a shield auction on her front gazon that had fallen victim to a 'zombie mortgage'
Millions of Americans took out second mortgages on their houses that were distributed with extremely low interest rates
McDonough, from Quincy, Massachusetts, believed that her Piggyback mortgage had been written off after several calls with her mortgage company that confirmed that it had done. To her surprise, a shield auction took place on her front lawn.
McDonough, who raised her two children there, had the house owned for 17 years and paid its mortgage every month.
But in 2022 her first mortgage and the monthly payments were suddenly $ 700 a month higher because they now include the Piggyback loan that she thought it had been dead.
It turned out that the 20 percent mortgage had been sold by the bank to a debt company within a party of 600 others, instead of being written off. McDonough managed to solve the problem with the bank and was able to adjust her normal mortgage again.
Banks had sold these debts with a very low rate to debt collectors and, as a result, stopped sending mortgage statements to their borrowers who thought they were clear.
Collectors just waited for the right time to jump.
As soon as the housing market recovered after the recession of 2008 and house prices rose again, it became worthwhile for them to go after that money, even if that meant that someone would lose his house.
These mortgages usually appear when debt collectors have already started shielding procedures.
Many homeowners have not received any information about the loans or extra costs for years
In many scenarios, people with two mortgages were forced to move after the rates were shot
When collectors close a house, they get a huge return on the increase in value over the years.
Many homeowners see the sausage case scenario play.
After she discovered her Zombie mortgage, McDonough was able to get her loan adjusted to lower the interest and make it affordable again. But she was lucky, many homeowners are not sure what they can do.
Although debt companies are allowed to come and collect under federal regulations, they must send monthly statements to the homeowner with the extra costs. But in many cases, such as McDonough's, homeowners received no information about the loans or extra costs for years before the Zombie mortgage appeared.
Take out a 'zombie' mortgage
Every province in a state registers and maintains public property registers who can find homeowners online. Easily search for your address and see if there is a second mortgage and a notification of standard.
Homeowners can also submit a request for information (RFI) that marks a second mortgage from the Zombie by requesting specific information about the loan, including the original loan amount, the outstanding balance, payment history and any supporting documentation. This helps to determine whether the debt is legitimate.
Know your rights
Homeowners have rights when it comes to combating the extra costs of a zombie mortgage or if they are confronted with shielding. Firstly, it is wise to hire a real estate lawyer.
According to the National Consumer Law Center, there are more than a dozen ways in which homeowners can fight against debt collectors.
The articles of association of restrictions vary the state per state, but homeowners can discover that they are eligible for extinguishing the second mortgage because time is used up.
Determine whether the collector has violated the Fair Debt Collection Practices Act (FDCPA) that prohibits unfair or misleading collection activities. Many collectors have found that they have violated the collecting of laws.
Discover in your state if a hanging shield is even valid. If your debt is valid, some collectors are willing to negotiate what you owe.
LeiboWitz, the mortgage expert, says that many collectors are open to reducing what is due, as long as they are legally given a payment.
“The borrower will have to negotiate with them if they are looking for any kind of refinancing on their current debt, or if they want to sell the property,” he says.
If you can't get out, some people choose to sell their house and use the profit to pay the second mortgage from the equity obtained on their first mortgage.
