Zombie Titles

AAA

DEFINITION of 'Zombie Titles'

A right to ownership and possession of a home that remains with a person who believes he or she has lost the property as a result of foreclosure. A zombie title is a title to real property that happens when a lender initiates foreclosure proceedings by issuing a notice of foreclosure and then unexpectedly dismisses the foreclosure.

If the person is unaware of the foreclosure dismissal, he or she will be left holding a zombie title. A lender may decide to dismiss the foreclosure for a variety of reasons, including a surplus of inventory, if the costs associated with a foreclosure cannot justify its costs or if the lender does not want to take possession of the home.

INVESTOPEDIA EXPLAINS 'Zombie Titles'

Lenders and banks are under no obligation to foreclose and take legal title to a property, even if the borrower has defaulted on the loan. A lender may choose to walk away, charging off the debt rather than taking title to the property.

Lenders are also not required to let a homeowner know if they have decided to dismiss the foreclosure. A homeowner may have moved out while unknowingly still holding title to the property, along with all of the associated costs and responsibilities of homeownership. Ownership does not change until someone else's name is on the title.

Zombie titles can lead to catastrophic financial troubles for homeowners who thought they had moved out and moved on. An unoccupied home, for example, can easily fall into disrepair. Not only does the homeowner remain liable for property taxes, but he or she can also be held liable by the local government for maintenance and repairs on the property.

If left unpaid, the homeowner could incur penalties and fees, and even face legal action. In addition, holders of zombie titles may have their wages and tax refunds garnished, and their credit destroyed, resulting in more financial trouble in the future. Homeowners can protect themselves against zombie titles by seeing the foreclosure process to completion, as well as making sure that the title legally transfers to someone else.

RELATED TERMS
  1. Foreclosure - FCL

    A situation in which a homeowner is unable to make principal ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Bank-Owned Property

    Properties that are taken into a bank's inventory, after a foreclosure ...
  4. Lender

    Someone who makes funds available to another with the expectation ...
  5. Title

    The right to the ownership and possession of any item that may ...
  6. Mandatory Binding Arbitration

    A contract provision that requires the parties to resolve contract ...
RELATED FAQS
  1. How did the Great Recession affect structural unemployment?

    The Great Recession greatly increased structural unemployment levels by creating a large disparity between the high supply ... Read Full Answer >>
  2. How does lower borrowing costs affect new airlines in the aerospace industry?

    Lower borrowing costs can help a new airline afford to obtain aircraft as well as pay for operating expenses such as salaries ... Read Full Answer >>
  3. Were collateralized mortgage obligations (CMOs) responsible for the financial crisis ...

    Many believe that collateralized mortgage obligations (CMOs) played a critical role in the 2008 financial crisis. Subprime ... Read Full Answer >>
  4. Why do banks securitize some debts, and how do they sell them to investors?

    Banks may securitize debt for reasons that include risk management, balance sheet issues, greater leverage of capital and ... Read Full Answer >>
  5. Do mortgage escrow accounts earn interest?

    A bank is not required to pay interest on any escrow accounts (also mortgage impound accounts) it holds for its customers. ... Read Full Answer >>
  6. What role did securitization play in the U.S. subprime mortgage crisis?

    The securitization of subprime mortgages into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) ... Read Full Answer >>
Related Articles
  1. Home & Auto

    What Homeowners Need To Know About Zombie Titles

    Understanding how the foreclosure process normally works - and how it dysfunctions in today’s market - will help you avoid becoming a victim.
  2. Personal Finance

    Dawn Of The Zombie Debt

    Are old debts coming back to haunt you? We'll show you how to keep these zombies from eating you alive.
  3. Economics

    What are Pork-Barrel Politics?

    Pork-barrel politics is a form of patronage whereby politicians favor their constituents in exchange for benefits such as campaign donations and votes.
  4. Economics

    Explaining the Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment banking business.
  5. Investing

    Who's Banning Facebook Now?

    Facebook may have over one billion monthly users, but there are many countries, including China, where the social media giant is banned.
  6. Investing

    Why Facebook is Banned in China

    Tight controls imposed by China have resulted in the ban of several foreign social media sites, like Facebook, but how did this come about?
  7. Investing

    REITs 101: How They're Regulated

    Here's everything you need to know about REITs in less than five minutes.
  8. Mutual Funds & ETFs

    How To Start a Hedge Fund In the United States

    A general overview of how to start a hedge fund firm in the United States, including complying with state and federal regulations.
  9. Mutual Funds & ETFs

    How To Start A Hedge Fund In The UK

    Starting a new hedge fund in the United Kingdom is more complex than in the United States. We discuss UK laws and regulations for starting a new hedge fund.
  10. Mutual Funds & ETFs

    How To Start A Hedge Fund In Canada

    Would-be hedge fund managers in Canada need to understand the laws and regulations that must be followed in order to start a fund in the country.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center