What is a Zombie Loan?

So there’s a called zombie loans. And what’s a zombie loan? An example would be a call I recently had with a potential new client where in 2005 they bought a house. They had a first and second 80 20 traditional. The first was a traditional mortgage, the second was a HELOC. And because of financial situations, they modified the first loan back in 2008, I believe.

And with regard to. Second, the lender, which was Carrington

did a charge off on the loan. And so the potential new client believed that second was gone. Unfortunately, that loan was bought by a company that ultimately ended up foreclosing on the client’s property. And we’re in the process of now trying to unwind that foreclosure. Before they try to sell the property to somebody else.

Even though the client would have made payments on this loan if they could have, they couldn’t. And the servicer, Dick O’Neill, refused to speak to our clients and never spoke with them and instead just moved forward with a foreclosure of the client’s property and now they’re potentially going to be forced out in the streets.

So a zombie loan is a loan that you thought disappeared, but ultimately was living the lie because the deed of trust still recorded against the property.. And some third party ultimately comes and buys the property.

Now, you’re not only responsible for the principal on the loan, all the interest that’s occurred since the date of the loan was started to the current date. So when you’re facing a situation where the second is either a charge off or forgiven, be sure to get documentation to support that so if this ever happens, you can go into court to show the court that you don’t have I don’t owe the money anymore.