Dormant Second Mortgages Raise Foreclosure Risk as Lower Rates Support Housing Demand
Zombie mortgages are dormant pre-crisis second liens that collectors still pursue, risking unexpected foreclosure for homeowners. Lower mortgage rates, moderate home price growth and wage gains bolster housing demand, although job market, inflation and geopolitical uncertainties could keep buyers sidelined this spring.
1. Zombie Mortgage Overview
Zombie mortgages are second liens originated before the financial crisis that many borrowers stopped paying after statute of limitations expired. Debt collectors continue to pursue these old loans, exposing unwitting homeowners to unexpected collection attempts and potential foreclosure on debts that may no longer be legally enforceable.
2. Housing Market Fundamentals
Mortgage rates have eased from last spring, home price growth has moderated and wages are rising, creating more favorable conditions for buyers. However, concerns over the job market, inflation trends and geopolitical tensions could delay purchase decisions and keep some potential buyers on the sidelines this spring.