Yes, Virginia, there is such a thing as a zombie foreclosure.
Online real estate brokerage and data analysis company RealtyTrac reports that foreclosure activity was down in both Illinois and DuPage County in August -- both year-over-year and month-over-month. The good news does not quite make up for the sting of the report released by RealtyTrac in June. Illinois, it seems, ranks fourth among the 50 states and the District of Columbia for zombie foreclosures.
RealtyTrac defines zombie foreclosures as "properties that have started the foreclosure process but never been foreclosed and the homeowner has vacated the property." Not too complicated, right?
We have all heard about or perhaps even experienced the pain of prolonged foreclosures. During the mortgage meltdown, lenders were foreclosing with undue haste and without proper documentation. It took some time to clear up the mess, and some communities are still dealing with a backlog. So, it seems that Zombies make up the backlog.
However, while the definition sounds neutral enough, a closer look at word choice and a little more research into the foreclosures themselves tell a different story. According to critics, lenders have more control over the matter than the definition suggests. And the upshot is that borrowers not only lose their homes, but they lose the chance to re-enter the housing market.
Where do Fannie Mae and Freddie Mac fit in here? We'll explain more in our next post.
Washington Post, "House Lawyer: New federal loan guidelines ease the sting of ‘zombie foreclosures’," Harvey S. Jacobs, Sept. 25, 2014
RealtyTrac, "Zombie Foreclosures Still A Lingering Legacy of the Housing Crisis," Ginny Walker, June 25, 2014