Zombie Second Mortgages In Ohio: When Old Home Loans Come Back To Haunt Homeowners
During the housing crisis in the late 2000s, a lot of people were unable to pay their second mortgage or HELOC loans. Lenders would put these accounts dormant for many years, in some cases over a decade. However, now folks are being sent to collections or facing lawsuits on these dormant accounts that are colloquially referred to as “Zombie Second Mortgages.” Ohio homeowners need to know how these debts work and what defenses are available.
What is a zombie second mortgage?
A zombie second mortgage is a second loan that is dormant after a foreclosure or modification of the first loan. During the housing crisis, after foreclosure or modification of the first loan, there was not enough home equity to cover two mortgages, so the second loan was generating no revenue.
Most of these second-mortgage lenders no longer tried to collect, but years after the initial non-collection, new lenders or debt collectors purchased these second mortgages at a low price, causing collections to resume. The non-collection of these second mortgages for years may cause homeowners to think these mortgages no longer exist, but in reality, these mortgages are being aggressively collected.
Why are these debts reappearing?
There are a variety of reasons why there is a rise in zombie second mortgages. For instance, as houses improve, lenders and debt collectors recognize opportunities to collect debts that were previously considered uncollectible. The debts may have changed hands several times, being sold to firms that buy distressed or old debt.
Collectors can use demand letters, credit reporting, or even lawsuits to recover the debt. Some collectors might even attempt to enforce the lien on your property.
Potential legal defenses in Ohio
Defenses that might arise against a zombie second mortgage claim in Ohio include the statute of limitations, documentation, and consumer protection. If the lender makes the claim too long after the default, it could potentially violate the statute of limitations. This time period varies depending on the type of loan. Documentation might not support the debt collector’s claim of owning the debt. Consumer protection laws might apply if the debt collector engages in misleading or unfair practices.
Why legal guidance matters
Second mortgage zombie debts are complicated from a legal standpoint. You may not know if the debt is still valid, if the collector is authorized to collect it, or if the time limits have expired. You may not know if you are ignoring the collector and risking lawsuits or judgments that could have been challenged.
When you are notified about an old second mortgage, you should take notice. A consumer protection attorney can help you investigate the history of the loan and determine if the creditor is valid in their claim.
Knowing your rights is the first step in preventing an old debt from affecting your future.
Talk to a Columbus, OH, Consumer Protection Attorney Today
Kohl & Cook Law Firm, LLC, represents the interests of Columbus residents who are saddled with zombie mortgage debt. Call our Columbus consumer lawyers today to schedule an appointment, and we can begin discussing your next steps right away.
