Zombie Foreclosure
A zombie foreclosure occurs when homeowners default on their mortgage, receive a foreclosure notice, and vacate the property before the lender completes the foreclosure. Because the lender has not taken title, the original owner still legally owns the home and remains responsible for taxes, insurance, utilities, homeowners association (HOA) fees, and maintenance. The property can remain vacant and fall into disrepair until the foreclosure process is finished or the lender takes title.
How it happens
- A lender issues a notice of default or other foreclosure papers after a mortgage default.
- Homeowners may mistakenly believe they must leave immediately and abandon the house.
- The foreclosure process often includes waiting periods and legal steps; the lender must complete these steps to take title.
- Sometimes lenders choose not to complete foreclosure (for example, to avoid costs for repairs and back taxes). When that happens, the homeowner remains on the title even though the property may be vacant — a situation often called a “zombie title.”
Fast fact: In Q4 2020 zombie foreclosures comprised about 3.8% of all foreclosures, though their frequency has declined since 2016 (ATTOM Data Solutions).
Impact on homeowners and neighborhoods
- The homeowner still holds legal and financial responsibility for the property, including:
- Property taxes and insurance
- HOA fees
- Routine maintenance and securing the property
- Abandoned houses can fall into disrepair, create safety hazards, and depress nearby property values.
- Local authorities or lenders may pursue unpaid taxes, fines, or maintenance costs against the homeowner.
What homeowners should do
- Remain in the home until you receive an official, legally required notice to vacate.
- Keep paying insurance and, if possible, property taxes and HOA fees while the title remains in your name.
- Communicate with the lender to confirm the foreclosure status and your options (reinstatement, loan modification, short sale, deed in lieu, etc.).
- Check public records or request written confirmation that title has transferred before abandoning the property.
- If you’re unsure of your rights or the foreclosure status, consult a housing counselor or an attorney familiar with foreclosure law in your state.
Short FAQs
- Will a zombie foreclosure affect my credit?
- Yes. Defaulting on your mortgage and walking away will damage your credit just as other foreclosures do.
- Where do zombie foreclosures occur?
- They can occur in any state but tend to be more common in lower-income communities. Regional patterns have varied over time.
- Why the name “zombie”?
- The term reflects a property that appears abandoned or “dead” while still legally owned by the original homeowner, lingering until the foreclosure is completed or title changes hands.
Sources
- ATTOM Data Solutions
- Urban Institute