"Zombie mortgages" are second mortgages from the housing bubble era that homeowners believed were forgiven or written off, but have recently come back to haunt them. Companies are buying these old mortgages and forcing foreclosures without the homeowners' knowledge. Thousands of homeowners are at risk of losing their homes due to these "zombie mortgages." Homeowners who took out second mortgages between 2004 and 2008 are especially affected, as they believed these mortgages were resolved during the loan modification process following the financial crisis.
The Massachusetts nurse discovered her home was being sold without her knowledge when she walked out of her house one morning to find 20 cars parked nearby with the intention of selling her home. She had owned the home for 17 years and was up to date on her mortgage payments. However, she was not aware of a "zombie" mortgage on her home. The second mortgage, which she believed had been forgiven, was sold in 2020 along with around 600 other mortgages to an LLC connected with First American National, a company that had bought her house at auction. The nurse continues to make payments on her first mortgage and has filed a lawsuit against the company, alleging unfair and deceptive practices.
NPR's investigation found at least 10,000 old second mortgages that foreclosure activity had been initiated on in just the last two years. These loans originated back during the subprime-lending housing bubble days of 2004 to 2008. The problem is feared to be widespread across America, with homeowners facing the risk of losing their homes due to "zombie mortgages" bought by companies, forcing foreclosures without their knowledge.