Despite foreclosure and eviction bans that have been in place in many areas of the country and on nearly all federally backed mortgages since spring, nearly 8,000 residential properties are currently in what ATTOM Data Solutions famously dubbed “zombie foreclosure” back in the housing crash of the mid-2000s. According to ATTOM’s Q3 2020 Vacant Property and Zombie Foreclosure Report, properties anywhere in the foreclosure process have dropped by 16 percent since Q2 2020. However, abandoned zombie foreclosures are on the rise, up 3.7 percent in the past three months.
Zombie foreclosures are vacant, residential properties stalled somewhere in the process of foreclosure. They are known as “zombies” because they essentially have become lost in the process and exist in limbo, usually without any party handling maintenance and upkeep. This is usually the result of the residents leaving the home because they believe a foreclosure is imminent but, in reality, usually these residents have only received a foreclosure notice indicating the lender’s intent to foreclose if the loan is not brought current. Actually, the notice of intent may precede an eviction notice by months or, in some markets and with some lenders, even years. In these cases, the lender is not yet responsible for the property but the residents are no longer caring for it either. Zombie foreclosures are a major contributing factor to neighborhood blight.
According to the ATTOM report, zombie foreclosures are clustered in the Midwest and South, with the highest percentages of zombie foreclosures appearing in Kansas (15 percent), Missouri (11.2 percent), Georgia (11 percent), Kentucky (10.7 percent) and Tennessee (10.3 percent).
“The latest numbers do throw a small potential red flag into the air, given the increase in zombie foreclosures,” said chief product officer at ATTOM Data Todd Teta. Analysts say the rising rate of zombie foreclosures is likely a result of foreclosure moratoria during the COVID-19 lockdowns, since many households may not have realized they did not have to leave during the pandemic.
“It appears that an increased number of vacant foreclosure properties may be an unintended consequence of the foreclosure moratoria put in place by federal, state, and local governments,” said RealtyTrac’s executive vice president Rick Sharga. “The sooner these abandoned properties can be processed and sold to homebuyers or investors, the better it will be for communities and neighborhoods across the country.”