Fighting the Foreclosure Nightmare that Never Ends

_Shari Olefson is an attorney-mediator and author of ""Financial Fresh Start: Your Five-Step Plan for Adapting and Prospering in the New Economy"":http://www.financialfreshstartthebook.com. Her quotes/comments can be found in publications such as the Wall Street Journal, Forbes, and USA Today, and she makes appearances on CNN, CNBC, Fox, PBS, MSNBC, and CBS._

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There's no question that the housing market is well along the road to recovery. Sales are going up, prices are increasing, and that's good news for all of us. But for some folks, the nightmare is not even close to over yet. Instead, an estimated 2 million homeowners are in the land of the zombie foreclosure.

The foreclosure process varies by state, but inevitably begins with the bank sending the homeowner a Notice of Default. That initial notice is then followed by the balance of the state's foreclosure process, which is lengthy and can be prolonged by numerous delays.

During that process, the homeowner still owns their home. Zombie foreclosures happen when the homeowner assumes they have lost their home and moves when the bank begins foreclosure, but the foreclosure process is never completed. So both the homeowner and their title are caught in between this world and the next, like a zombie.

The problem is that once the homeowner leaves, there's an opportunity for real estate taxes to go unpaid and the property to go unmaintained, which often leads to code enforcement violations, vandals, and even squatters. You wind up with a whole slew of new problems--which the homeowner, not the bank, can still be liable for without even knowing it.

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Traditionally, the point of foreclosing on a home was to sell it and pay back the loan, but a lot has changed. For example, in areas where property values went down, and costs and delays skyrocketed--like HOA fees or the time it takes to foreclose--it might not make financial sense anymore for the bank to foreclose.

In other words, after they pay off those expenses, there might not be any money left to pay back the loan, so why bother? Another big issue has been all the new regulations. For example, we've had a ""$26 billion settlement"":http://dsnews.comarticles/robo-signing-settlement-finalized-2012-02-09 in the attorney general robo-signer case, and another ""$9.3 billion settlement"":http://dsnews.comarticles/hsbc-to-pay-249m-in-foreclosure-settlement-2013-01-18 in the case with federal regulators.

Banks can get in big trouble now if there are any errors in the foreclosure process, so in many cases, they're afraid to move forward with those lawsuits. We've also seen some of the biggest foreclosure law firms shut down, and combined with huge backlogs in the courts, it can sometimes take 600 or 700 days to foreclose. These are all reasons behind zombie foreclosures.

Homeowners can take steps though, as well as anyone else adversely impacted by a zombie foreclosure, such as HOAs or municipalities.

Your first step when fighting back against a zombie foreclosure is to check the county or tax records. These are online in most areas now and will show you if you're still on the title.

Anyone who has been foreclosed on might want to do this, if only to be sure. If you see that the bank has started but not finished a foreclosure, contact the bank and try to find out what their plans are.

The good news is that most banks are far more open nowadays to negotiate a short sale, deed in lieu of foreclosure, or agree to a loan modification than they were when most of these foreclosure cases were started.

The next step is to review current records for past due taxes, code violations, or other liens, and check out the property condition. You want to make sure you do what you can to avoid any more damage than what has already occurred and to also secure the home.

Depending on the circumstances, you may be able to rent the home or move back into it--a happier ending than most zombie movies get to see.