Just as nature abhors a vacuum, the CFPB abhors any area of the economy where it's not rooting out evildoers and saving innocent consumers from perils they may not realize endanger them. One of the vacuums that the CFPB is rushing to fill is the land of "Zombie Foreclosures." According to National Mortgage News' Kate Berry, the CFPB sees this as the badlands where straight shooters like the CFPB need to "clean house."
Some borrowers are being harmed when a mortgage servicer starts a foreclosure but then fails to complete it, leaving borrowers on the hook for the mortgage debt, taxes and maintenance even though they may have already moved out, said Laurie Maggiano, the CFPB's servicing and secondary markets program manager.
"The CFPB is beginning to look very closely at abandoned properties and zombie foreclosures," Maggiano said Tuesday at a conference sponsored by the Federal Reserve Bank of Cleveland. "There is direct borrower harm if a borrower believes a foreclosure on their property has been conducted and they are no longer responsible, and months or years later find out that they are, that there was never a foreclosure and they have large financial responsibilities that they never knew about."
These loan servicers! They trick the borrowers into moving out of their unpaid-for homes with threats of foreclosure, and even commencement of foreclosure proceedings, then they "go dark" and, behind the non-paying borrowers' backs, let the houses sit vacant. Why do they do this? Apparently, because, like The Joker in "The Dark Knight," they believe in chaos theory, especially when they're the agent of chaos.
Do I really look like a guy with a plan? You know what I am? I’m a dog chasing cars. I wouldn’t know what to do with one if I caught it. You know, I just… do things.
Consumer advocate Peter Skillern thinks this whole gambit by loan servicers is rotten to the core.
Servicers typically flood defaulted homeowners with as many 250 letters and phone calls telling them their home is going into foreclosure, says Peter Skillern, the executive director of Reinvestment Partners, a Raleigh, N.C., nonprofit. But they usually fail to notify the borrower when the foreclosure is stalled.
"They are pushing the borrower out of the home, which results in abandonment," Skillern says. "Servicers need to make sure they are accurately communicating the status of the foreclosure process to the borrower."
Yes, so the borrowers, who haven't been making their mortgage payments, in some cases for years, can remain in, or return to, the houses "rent free" while continuing not to pay their loans. This assumes that with someone living in the house, the occupant will transform it from what the article alleges is a property with respect to which "the cost to repair a home is more than the property is worth" into a credit to the community. Even if they can't make their mortgage payments, they'll repair it. Honest.
For the last several years, we've been discussing the problem of broken cities blaming lenders for their decades of bad decision-making. The areas where homes are being abandoned by lenders are not areas that got to be in the condition they're in because of "Zombie Foreclosures" initiated by lenders who just mess with borrowers because "they just do things." Moreover, while knowingly or even recklessly initiating foreclosure proceedings or otherwise bombarding borrowers with foreclosure notices and then traveling to Neptune, never to be heard from again, would not fly with etiquette experts, the borrowers are not the only, or even the primary, folks being "inconvenienced." Unless the borrowers suddenly resume paying the freight on their mortgage loans, all that wasted effort is likely to results in costs borne by the owners of the loans (or the securities backed by the loans). If this is a problem worthy of CFPB wrath, then the investors ought to be looking into this major "abuse," as well.