So-called “zombie mortgages” are coming back to life across the U.S. as home prices rise. In the run up to the housing crash in 2008, millions of Americans took out second mortgages on their homes that they then defaulted on during the crisis. Lenders didn’t pursue foreclosure because the home price crash made it unlikely they would recoup the money. Homeowners often assumed the debt was cancelled. Now, these dormant loans are coming back to life, hence the term “zombie mortgage.” The forgotten mortgages had been bought for pennies on the dollar by debt collectors who have patiently waited for housing prices to rise to record levels, and now it’s worth their while to chase the money. Tacking on retroactive fees and interest often means foreclosing on the homes to grab a huge slice of the increase in value. One key detail that can be used against debt collectors, however, is the fact that adding years’ worth of interest and late fees on top of the amount the homeowner initially borrowed requires that they send homeowners monthly statements detailing the added costs. In many cases, homeowners haven’t received any such information about their loans.
