Just imagine: you’ve had to go through a long, difficult foreclosure process – tons of stress, packing up all your belongings and having to figure out how to move on.

But then years later, after a fresh start, you get a letter that says you still owe property taxes on the home that’s been out of the picture for years.

This haunting situation has an appropriate name – zombie mortgages – and, unfortunately, they’re difficult to get rid of (just like their namesake).

What You Should Know as an INB Customer

Don’t start shaking in your boots. If all your previous mortgage loans are from INB, you don’t have to worry about zombie mortgages.

Our processes help protect mortgage customers. Debts like these should appear on title searches, which we conduct on every loan when we originate, purchase, or refinance. With these thorough searches, we make sure you’re aware of any outstanding debt before moving forward with a new transaction.

So, what exactly is a zombie mortgage, and how can you protect yourself against them?

What’s a Zombie Mortgage?

A zombie mortgage refers to mortgage debts that you might have thought were forgiven or satisfied long ago but that still exist.

This situation usually happens during a foreclosure or a loan modification, due to a breakdown in communication between the lender and homeowner.  The former homeowner, thinking they no longer have any responsibility for a debt, often moves on with their life.

However, old debts can be written off by the lender and sold for pennies on the dollar to debt collectors. Even though the mortgage company stops communicating with you, a debt collector may reach out to collect on the debt years later – often tacking on a mountain of retroactive interest.

So, you may discover that a home or loan you thought was long gone has come back to haunt you with taxes, liens and other fees.

But we want to emphasize that this won’t happen at INB. Why? INB doesn’t bulk-sell non-performing loans to creditors.

Why Are Zombie Mortgages Emerging from Other Banks?

A zombie mortgage problem has recently emerged, first created during the run-up to the 2008 financial crisis. According to a recent NPR investigation, thousands of homeowners were given 80/20 loans on their homes, with the 20% being a second mortgage so a homebuyer didn’t need to come up with a down payment.

However, many of these were adjustable-rate mortgages, and when the housing crisis hit, interest rates skyrocketed. Some homeowners were given the option to modify their loans, with many being told those second mortgages were forgiven or canceled.

So why are these second mortgages coming back from the dead now?

If a home is foreclosed on and then gets sold, the first mortgage takes all the money needed to cover that debt, and anything left over goes to the second mortgage. Back in 2008 when home prices collapsed, there wasn’t enough money for the second mortgage.

Now it’s a different story. Home prices have risen considerably. If a house gets foreclosed on, there is plenty of money to pay off both mortgages, giving predatory debt collectors plenty of incentive to bring these silent second mortgages back to life.

Zombie mortgages might also occur when lenders initiate foreclosure proceedings when a homeowner defaults on their mortgage but don’t follow through on completing the process. Municipalities can issue fines for neglected properties, and taxes will continue to build up. As the original homeowner, you could still be responsible for these costs, even if you haven’t set foot in the home for years.

Next Steps

If you’re an INB mortgage customer, you don’t have to be concerned about zombie mortgages.

If you do find yourself caught in a zombie mortgage situation with another bank, consult with a real estate attorney. The Consumer Financial Protection Bureau has also issued guidance on protecting yourself from a zombie mortgage; learn more here.