Zombie foreclosures continue: Zombies aren't after us, they're in charge of us

This post by Roy Oppenheim was originally published in Yahoo! Homes and is being redistributed on South Florida Law Blog with their permission.

Recently, we won a court victory against one of the nation’s biggest financial players.

Our client, who had a $2.5 million mortgage, stopped making payments after the bank forced placed insurance on the home, even though he already had insurance. Forced placed insurance is a policy that, as the name implies, is placed on a home when the homeowner’s own policy either has lapsed or the bank decided it’s not sufficient.

Just before our client was about to get a “directed” — or favorable — verdict from the judge, the bank fell on its sword and dismissed the suit, recognizing it was about to lose the case because it was unable to prove that it had the proper documentation needed to legally foreclose on the home.

But this win could be short-lived since our client can still fall victim to what is quickly becoming known as a “zombie foreclosure.” As the name suggests, these zombie foreclosures are even more of a nightmare than your basic, everyday foreclosure.

Thousands of homeowners have and continue to become victims of zombie foreclosures — liable for homes they didn’t even know they owned after lenders decided not to pursue a foreclosure after all.

As I have written about previously, banks have been walking away from foreclosures with impunity because it simply isn’t worth their time or money to pursue them. Because there are no regulations in place that say the lenders must tell the homeowner that they have changed their mind about the foreclosure, borrowers are still on the hook — not only for the mortgage on a home they may, or may not, live in, but also any property taxes, homeowner association fees, etc.

Often, these debts can go unpaid for years without the homeowner even knowing about it. This can result in a domino effect, with the victim first losing the house, then their credit score is tarnished, and eventually the zombie foreclosure has eaten away on their life savings — devouring them financially.

For our client and others who have won similar cases against lenders, the win means the bank will have to pay attorneys fees and has five years to re-file the lawsuit measured from the time they first accelerated the loan, if of course they can come up with the proper documentation that they didn’t have the first go-round.

At the same time, however, our client will continue to live in fear that the bank can turn around and one day bring a foreclosure action against him back from the dead.

Real estate attorney Roy Oppenheim left Wall Street for Main Street, founding Oppenheim Law with his wife in 1989 in Fort Lauderdale, Florida. He is vice president of Weston Title and creator of the South Florida Law Blog, named the best business and technology blog by the South Florida Sun-Sentinel. Follow Roy on Twitter at @OpLaw or like Oppenheim Law on Facebook.