Due to the housing crisis of the past 5 years, efforts have been made to give homeowners every conceivable chance to avoid the foreclosures of their properties, so that they are not forced out of their homes. While well-intentioned, some of these provisions have resulted in unintended consequences. One such impact has been the rise of “zombie foreclosures.”
The zombie foreclosure occurs when a homeowner is foreclosed upon and then moves out of the property during the foreclosure process. Because foreclosures in New York now take so long to complete, the abandoned property may remain vacant for months or even years. During this time, it becomes a blight on the neighborhood it is located in, prompting outrage from neighbors concerned about its detrimental effect on a town’s property values.
This happens more than ever before due to the many new procedural requirements that have been added to the foreclosure process and the congested court calendars that have resulted from the exponential increase of residential foreclosures during the past several years.
To combat these zombie foreclosures, some municipalities such as Nassau and Suffolk counties have created new processes to expedite foreclosures in cases where the home has already been abandoned by its owners.
In order to avail themselves of these new procedures, lenders should consider regularly inspecting properties securing delinquent loans to identify any that are, in fact, vacant and utilizing the new procedures to expedite foreclosures.
Additionally, Lenders should solicit Deeds in Lieu of Foreclosure from delinquent homeowners, in exchange for a release from their liabilities, REGARDLESS OF THE EXISTENCE OF SUBORDINATE LIENS! By accepting a Deed in Lieu of Foreclosure, Lenders can avoid the “zombie foreclosure,” begin to make any needed repairs, and market the property while the foreclosure is completed.
Finally, Lenders should continuously communicate with defaulting homeowners to evaluate if their circumstances have changed for the better or worse and to determine if a loss mitigation opportunity has been created before they decide to simply move out.
Although the New York foreclosure process will inevitably take too long, sometimes, as shown above, there are ways to shorten it.
Are you doing everything you can?
