Title Tale: Zombie Mortgages Part II

Written By: Kevin Weaver, Underwriting Counsel

A few issues ago we addressed the problem of zombie mortgages.  Here is a recent example of how we managed to kill one.  No names have been used so as not to embarrass the zombie lender.

The mortgage in question was a $48,000 loan from an LLC in 2007.  In 2014, the loan was assigned to another LLC, and there the trail ended.  Our escrow team did copious amounts of research to find the assignee or its successors-in-trust.  We finally found a company who claimed to own the debt, and they were willing to get the necessary couple of assignments from intervening owners of the debt.  The paperwork was appropriate, and until we received the payoff demand we figured we’d be paying the loan and moving on.  However, we received a payoff demand for over $100,000 (remember, the loan was originally for $48,000), and a spreadsheet indicating no payment had been made on the loan in almost ten years.  A true zombie mortgage, but one where the facts just didn’t feel right, or fair.

So, we questioned the borrower over any knowledge he had of this loan, and in that conversation found that he had filed for bankruptcy in 2011.  That sounded like it could be a clue, so we reviewed the bankruptcy file and, lo and behold, an order stripping the lien of this specific mortgage (because there was not enough equity in the home to support the lien) was located.   A copy of the order was emailed to the alleged owner of the debt, who responded by saying their attorney agreed that once the debtor was discharged the lien was effectively stripped from the property, and they advised they were closing their file.

So, if you encounter a zombie mortgage, do your research, check all the paperwork, talk to your borrower, and you too might be able to save your borrower $100,000.  Or, just use Allegiant Reverse Services and we’ll do the hard work for you.