Zombie Titles - albatross mortgages around homeowners' necks

Reuters reports on a little-known feature of the mortgage crisis -- the zombie title. Michelle Conlin, writing from Columbus, Ohio, tells a hair-raising story about home-owners who receive notice from their banks that the bank is foreclosing on their home for a delinquent mortgage. The home-owner leaves the home, and believes that that is the end of the story for them and this house.

Apparently, a number of banks are not following through with selling these foreclosed properties. They either do not notify the home-owner, or the home-owner fails to receive the notice, for whatever reason. But the home-owner's name continues to be on the deed, on the tax records, on all the legal documents. So when the county sends a notice that the property is becoming derelict, the home-owner is liable. When the taxes are due and over-due, the home-owner is liable. And -- surprise! -- the mortgage payments are still due... and piling up with interest and penalties. All happening without the home-owner's realizing they are responsible for anything about the property.

The Reuters report includes some heart-rending examples of how people's lives are being devastated. This is not happening all the time, but often enough that some agency or lawyer should be looking at either a cause of action or some regulatory action. The report mentions that out of some 10 million mortgage foreclosures, 2 million have not come out for various reasons, including the banks simply dropping the mortgage action, as with these zombie titles. The report goes on the say that housing court judges are seeing thousands of these zombie title issues across the country, and that the number seems to be rising.


The home-owner who has the zombie title cannot qualify for disability, because the title to the phantom house appears to be a capital asset. Home-owners find

wages garnished, their credit destroyed and their tax refunds seized. They've opened their mail to find bills for back taxes, graffiti-scrubbing services, demolition crews, trash removal, gutter repair, exterior cleaning and lawn clipping. At their front doors they've encountered bailiffs brandishing summonses to appear in court.

In some cities, people with zombie titles can be sentenced to probation - with the threat of jail if they don't bring their houses into compliance.

Banks have realized that holding the asset or trying to sell the mortgaged house actually saddles them with a loss. Thus, they are often quietly stopping all action towards the sale of the property after beginning the foreclosure effort. Homeowners too often expect the banks to act as they used to, and assume the bank will put the house up for auction to satisfy the outstanding debt on the mortgage. But banks have realized that by walking away from the debt, they often gain more by filing for insurance on the debt, and avoid all the costs and responsibilities of owning the property. But if they do not properly notify the mortgagee, a zombie title results. Reuters says there is no regulation requiring banks to notify the home-owner, and so it often does not happen.

A number of cities have attempted to create registries of abandoned houses to try to force the mortgagors to take more responsibility for the properties they seize. Neighborhoods become blighted as the properties are gutted by vandals, and the banks or other mortgage servicers claim they have no responsibility to manage or maintain the properties. These organizations have opposed the registries proposals, according to the Reuters report.

Tip of the OOTJ hat to my terrific, peripatetic daughter for pointing me to this story.
The decoration for this post comes from a clever and entertaining blog, The Rules Lawyers, "Applying the Supreme Court's rules of statutory interpretation to resolve Warhammer 40K rules disputes" http://www.theruleslawyers.com/2012/10/6th-edition-rulings-plague-zombies-unit-size-limits/

Alert! Changes in Credit Card Interest Rates & Penalty Rules!!!

The new law and regulations governing credit cards is going into effect, and it's something that everybody with credit cards needs to be aware of! Visit the Treasury Department's handy website: www.helpwithmybank.gov for a useful and easy guide. But here are some highlights that you need to be aware of:

Banks are going to be raising the interest rate on your credit card. They will send you a notice, usually saying that the interest rate will kick in in 15 days. [YOU need to know that this interest rate will only affect new purchases after the 15 days date IF you REFUSE the increase and choose to pay off your balance at the old rate!! But you have to be proactive and register your refusal.]**This may be an error! The Boston Globe article specifically said this, but I cannot find anything on any of the websites or in the text of the Federal Register (yet!) to verify this statement If it's a mistake, my apologies, folks. I will finish correcting as soon as I finish reading through the Federal Register!

Penalty rates for late payments are going to go way up!! Generally, banks can't change the rates on existing balances, UNLESS you are 60 days late or more paying the balance off! Then they can come at you with a penalty interest rate as high as 29.99% or higher!!

The law was designed overall to protect consumers, so it's ironic that there are these surprise provisions to warn you about. From the Treasury's website, helpwithmybank.gov (the Treasury's site is more helpful than the Federal Reserve's link, but look at both if you have questions about credit cards.

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (also known as the Credit CARD Act) for credit card companies will result in new credit card policies and protections for you. Effective February 22, 2010 there will be new rules for rates, fees, and payment due dates. The new law also provides protections for consumers under age 21.

The Federal Reserve has prepared a brochure titled: What You Need To Know: New Credit Card Rules, that highlights the key changes.
You can view and print the pamphlet at the following link:http://www.federalreserve.gov/consumerinfo/wyntk/creditcardrules.htm.

An even more helpful website than either government site is the Credit.com site.
They summarize the new law and regulations in plain language and make it very accessible. The nice thing is that it is written from the consumer point of view, which is different from the government sites. The site has lots of other helpful information about consumer and credit concerns. Links are at the bottom of each page. The site seems very credible, consistently rating number 7 in lists of top 20 or top ten financial websites from places like CNNMoney.com or FastCompany.com or even number 6 at Finovate's list. It claims 15 years of experience and a large professional and experienced staff.

Wikipedia (at least as it appears on 7/13/11) contains an excellent summary of the law as well, including the controversial addition of an unrelated rider that prevents the Secretary of the Interior from prohibiting citizens to possess firearms in any National Park. The entry is excellent for including links to websites providing full text of the statute, versions of the bill, and regulations that are related to the bill. The list of related regulations includes some that are not linked on the Internet, very complete.

The image is courtesy of http://blogs.dallasobserver.com/unfairpark/2011/03/dallas-fort_worth_deep_in_cred.php

Professor Warren Takes on the Credit Industry

I had the pleasure of serving as the library liaison to Professor Elizabeth Warren when I worked at the University of Pennsylvania Law School. She has since moved on to Harvard Law School, where she specializes in commercial law and bankruptcy law. Her treatises on bankruptcy have been very influential, drawing as they do on empirical methods to paint vivid portraits of real people caught in the web of debt. Threee of the best known are As We Forgive Our Debtors: Bankruptcy and Consumer Credit in America, The Fragile Middle Class: Americans in Debt, and The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke. Through her scholarship, she has helped to change the image of debtors, sometimes characterized as wastrels and spendthrifts, to that of victims of predatory lending practices. During the current debate over health care reform, one of the themes has been the number of people who have declared bankruptcy because of medical debt caused by lack of health insurance. Professor Warren has been instrumental in bringing this issue to the forefront of the debate.

She is the subject of an entertaining article in today's Boston Globe. Professor Warren came from a family that struggled after a series of financial reversals. Both of her parents worked, but things were always difficult for them. This experience helps her to empathize with other families that are struggling despite hard work. She has proposed a new federal agency, the Consumer Financial Protection Agency, which is the subject of a bill, H.R. 3126, that was introduced on July 8 by Representative Barney Frank. It passed the House Financial Services Committee on October 29, but faces opposition in the full House and Senate. If approved, the new agency would regulate consumer financial products, and is vehemently opposed by business groups. Some in the business community accuse Professor Warren of positioning herself to be the director of the agency if it comes into being, but she feels any such discussion is "premature." In the meantime, she continues to teach and to serve as TARP overseer.