CFPB eyeing "zombie" foreclosures

March 17th, 2014 6:49am
CFPB eyeing "zombie" foreclosures

So-called "zombie" foreclosures have impacted thousands of consumers in the U.S. over the last couple of years, according to Reuters. When banks foreclose on a property, it is usually beneficial for them when the homeowners move out without making trouble. However, in the case of thousands of properties with values too low for banks to deem a worthwhile investment of time, after the owners move out, financial institutions simply seem to forget about the property. 

The problem is two-fold. One, homeowners retain the ownership of the property in this case, but usually aren't informed that they do, according to Reuters. This means that bills pile up in their name, causing real damage to credit down the line.

The second problem is that abandoned properties attract crime, decay naturally and bring down the values of surrounding homes, RealtyTrac noted. While some of these homes can be rehabilitated, the vast majority need to be demolished in order for blight removal to remain financially viable, according to a study by Harvard University on zombie foreclosures in Cleveland. 

In order to combat this strain on the real estate market, the Consumer Financial Protection Bureau is working to relieve borrowers from debt on zombie foreclosures, identify abandoned properties faster and eventually to create a national definition of "abandonment," which would facilitate in moving abandoned homes to new owners faster.

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