Johnny Depp Escapes Hollywood Horror: $10 Million Lifeline Saves Homes As Millions Face Zombie Foreclosure Fate
What is a zombie foreclosure and how does it impact homeowners and the housing market?
A zombie foreclosure occurs when a homeowner vacates their property after receiving a notice of mortgage default, believing they will lose the home in the pending foreclosure3. However, the foreclosure process may get canceled for various reasons, and the home title remains with the homeowner, who may not be aware they still own the home. The problem is that they are still financially responsible for it.
Impact on Homeowners:
- Penalties and fees: If the foreclosure process drags on, it could result in the accrual of interest, penalties, and fees, increasing the financial burden on the homeowner.
- Damage to credit: A zombie foreclosure can seriously damage the homeowner's credit, making it difficult to obtain loans in the future, including new mortgages, auto loans, and personal loans.
- Legal consequences: Not making payments could result in a variety of lawsuits. The city might sue the homeowner over unpaid property taxes, or the homeowners association might sue to collect fees.
Impact on the Housing Market:
- Decrease in property values: A zombie foreclosure can cause a home to become an eyesore and a hazard to the local community, making the neighborhood less desirable and leading to a decrease in property values across the board4.
- Decrease in new construction: New builders may be hesitant to pursue projects in areas with zombie foreclosures, believing they can't compete with the low prices of foreclosed homes.
- Opportunities for investors: Investors can purchase these homes at bargain-bin prices, renovate them, and either sell or rent them. While this can create opportunities for investors, most zombie foreclosures' impacts on the housing market are negative, and local communities generally suffer the consequences as a result4.
What financial challenge did Johnny Depp face regarding his properties in West Hollywood, and how did he resolve it?
Johnny Depp faced a financial challenge regarding his two West Hollywood properties when they were at risk of foreclosure. To resolve this issue, he took out a $10 million loan, which allowed him to save his homes from foreclosure1.
What factors contributed to the nearly disappearance of zombie properties from the U.S. housing market landscape?
The nearly disappearance of zombie properties from the U.S. housing market landscape can be attributed to several factors:
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Economic Recovery: The U.S. housing market has experienced a period of economic recovery, with home values increasing yearly since 2012. This has led to a rise in homeowner wealth to historic levels, with nearly 95% of homeowners paying down mortgages having built at least some equity.
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Decline in Foreclosure Activity: According to ATTOM's second-quarter 2024 Vacant Property and Zombie Foreclosure Report, foreclosure activity has declined this year following a surge in cases that hit after a nationwide moratorium on lenders pursuing delinquent homeowners was lifted in the middle of 2021.
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Rising Home Equity: Rising equity flowing from rising home values has not only kept foreclosure cases from spiking since the moratorium was lifted but also keeps giving delinquent homeowners a valuable resource they can use to either stave off eviction or sell their homes and move on.
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Stable Vacancy Rates: The vacancy rate for all residential properties in the U.S. has remained virtually the same for eight quarters in a row1. This stability has contributed to the decrease in zombie properties.
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Government Intervention: The federal government's efforts to shield homeowners from an economic slide stemming from the worldwide Coronavirus pandemic have also played a role in the decline of zombie properties. A moratorium against lenders foreclosing on government-backed mortgages has been in place since last March, affecting about 70% of home loans in the United States.
These factors combined have contributed to the significant decrease in zombie properties in the U.S. housing market landscape.