Published: October 2022

Advocates ask CFPB to take action against mortgage lenders, servicers and debt collectors for their handling of “zombie” second mortgages

Nearly three dozen advocacy organizations voiced their concerns to the CFPB about “zombie” second mortgages—risky subprime loans that have seen no activity for many years—that are coming back to life and threatening to strip (mostly lower-income, BIPOC and older borrowers) of their homes and equity.

Consumer Action was among nearly three dozen advocacy groups that urged the Consumer Financial Protection Bureau to take swift action against the loan holders, servicers and debt collectors that are violating the Fair Debt Collection Practices Act (FDCPA), the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) in their handling of “zombie” second mortgages. These loans—many with predatory terms—taken out before the Great Recession (2007-2009), have laid dormant for years, with many borrowers believing they had been forgiven, modified with their first mortgages, or discharged in bankruptcy. Other borrowers had been unable to make payments because they didn’t know where to send them. Now, with the increase in home values, the lenders (or the debt buyers bought the loans) are collecting on the loans—plus the fees and interest accrued over a decade or more—using the threat of foreclosure to coerce payment. Their practices—such as failing to provide communications about the debt for years, failing to verify the debt, and collecting on debt past the statute of limitations in some states—violate several consumer laws. The issue of “zombie” second mortgages particularly affects lower-income borrowers, older borrowers, and homeowners in communities of color.

Lead Organization

National Consumer Law Center

More Information

Click here to read the coalition letter.

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