Now, word is spreading around the country about a rising new horror in the Foreclosure Fraud crisis and Robosigning mess, which the country (and especially South Florida) has been reeling from for several years now; the ZOMBIE TITLE.
That’s right: the Zombie Title, similar to the earlier warning we gave about the Zombie Note scare back last March. Sort of a sequel to the earlier Zombie storyline here in Florida foreclosure defense circles.
What is a Zombie Title? How Does it Hurt People? Both Buyers and Defaulting Home Owners Are Getting Hurt
Here’s what is happening in some Zombie Title situations: well meaning families in South Florida and elsewhere are buying foreclosed properties in good faith from banks. They are putting down good money. They are working with realtors. They are getting title insurance and making sure to get an appraisal before they buy. Problem is: they are buying property that the bank, as seller, does not legally own.
First, Zombie Titles Are Bloodless: They Transfer Nothing to the Home Buyer
The title that the buyer gets from the bank in the purchase of the foreclosed home is therefore a “zombie title.” It’s transferring nothing in the way of legal title because the bank didn’t have title to transfer under state real estate law.
This didn’t just start happening. We’ve been discussing problems with title transfers in these Wild Wild West days of Florida real estate for a long time now. Court cases have been filed on issues involving essentially a “zombie title” already, like the Massachusetts case that was filed over two years ago by Mr. Bevilacqua who sued Mr. Rodriguez to clear the title to a house he had bought at a foreclosure sale, with surprising results. (Yes, the Massachusetts Supreme Court held that Mr. Bevilacqua had a “zombie title,” though no one labelled it a “zombie title” at the time.)
Second, a New Twist on Zombie Titles: The Bank Walks Away From the Foreclosure to Leave the Defaulting Home Owner in Limbo
Today, Reuters is reporting on a new twist to the Zombie Title situation: now, banks are deciding to walk away from the foreclosure rather than go through with the process of taking legal title to the property that served as collateral for the home loan. Banks are doing this quietly, without notifying anyone (like their borrower and the one who thought title had gone to the bank) that the bank was walking away from the foreclosure process without completing it.
Which means, that people who thought that they had put the defaulted mortgage behind them; who thought that the bank had taken over responsibility for the home and the upkeep and the property taxes learns that none of this has happened. The bank has vanished, Elvis has left the building, and the home owner is left in some kind of limbo.
By opting to blow off the foreclosure, the bank leaves the home owner vulnerable to huge financial hits (these can be in the $1000s) for back property taxes, clean up fees for vacant property, injury liability, fines by municipalities or HOAs, etc. When does the property owner discover this? Usually when the notices catches up to him from someone that wants to be paid (and after the bank has explained it’s not taking responsibility for the land).
Unless and until the foreclosure is officially dismissed from the court records or a foreclosure sale takes place, it remains the responsibility of the home owner. The title to the land remains in the owner’s name until it is legally transferred to the bank by a Certificate of Title: government authorities and others can look to that owner to be responsible for issues until the title changes out of the owner’s name. The owner is in limbo until the bank either finalizes the foreclosure or a judge signs an order dismissing the foreclosure action.
Larry Tolchinsky’s Tip:
As we repeatedly discuss here, the current Florida real estate market is a Wild Wild West where past years of respecting contract law and real estate law, as it has set on the books for decades, has gone by the wayside in favor of making money and/or escaping liability for bad acts. It is simply no longer true that a citizen can go to the Florida real estate records and confirm that a piece of property has clear title, or determine who is the rightful owner of the land. It’s just not that easy in today’s crazy world.
Anyone involved in a foreclosure situation, or who faced one in past years, needs to know where they stand regarding the land and the debt under current law. Anyone wanting to buy property in Florida that may have been touched by a defaulting loan likewise needs to determine what rights they may or may not have to that property should they purchase it and the prior homeowners need to determine if they are still responsible for that property.
Florida real estate lawyers understand the current economy and most offer free initial consultations (like we do) as well as working with clients to make legal representation available and affordable (ditto). However, as the new Zombie Title horror stories circulating through the national news suggests: it’s a legal mess and having legal counsel can be very important.
Be careful out there.
Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at email@example.com, or (954) 458-8655. If you have a specific situation, please call or email Larry because he can’t answer specific fact questions in general comments. He’s happy to take your call.