Zombie Foreclosures are Everywhere!

Close your windows!  Lock your doors!  Turn out the lights and hide!  The zombies are coming!

No, seriously, they are, but these zombies are not a threat to your life.  These are zombie foreclosures, and they seem to be increasing nationwide.  What are zombie foreclosures?  Well, let's say a homeowner who is not making mortgage payments gets a foreclosure notice.  Instead of trying to fight it, the homeowner decides it's not worth it and moves out.  Subsequently the bank does not complete the foreclosure process. 

Wait a minute, why didn't the bank foreclose?  You may have noticed that 1) the real estate market crashed a few years back; 2) many homeowners are facing or fighting foreclosure; 3) the economy's been troubled.  As a result, there is quite a backlog of foreclosures.  Moreover, some banks don't even want to foreclose because they don't want to be stuck with the burden of maintaining homes, especially as more and more municipalities impose fines for allowing homes to become fall apart.

In a zombie foreclosure, at the end of the day, the homeowner has moved out, but the bank didn't foreclose.  Now the home is vacant, and no one is taking care of it.  It could be flooded, damaged or used by thugs as a meth lab.  No one is paying the insurance or real estate taxes or maintaining the house.

This is a high risk situation.  The home could attract criminals or just simply fall apart.  Either way, this hurts the community.  Moreover, the unsuspecting homeowner who moves out still owns the house!  He could be stuck with real estate tax bills and other expenses related to the house, and they may come as a complete surprise.

According to RealtyTrac, there are approximately 302,000 such zombie foreclosures nationwide.  That's about 35% of homes facing foreclosure overall.  Illinois is ranked second in the number of zombie foreclosures.  Only Florida has more zombie foreclosures than Illinois does. 

So as the weather improves and you are out and about your neighborhood this spring, be careful where you go. . .A zombie may be lurking around the corner!

Proposed Changes to Rules about Condominum Assessments when Buying Foreclosures

The Illinois Condominium Property Act states what a Buyer needs to pay to the association when purchasing foreclosed property from a lender.  A blog post I wrote some years ago talks about that.  But the reality is, there's a lot of confusion out there.  A new bill introduced recently to the state House makes some proposals to help clarify the prospective buyer's obligations. Specifically:

1)  Anyone who purchases a foreclosed condominium from the mortgagee of the condominium will be responsible for up to 9 months of regular back assessments.

2)  The association can include legal fees and court costs incurred because of the non-payment of assessments, but the TOTAL bill to the new buyer cannot be greater than 9 months of regular back assessments total.

3)  Any foreclosure sale notice must specifically state that anyone who buys the property from the mortgagee may be responsible for up to 9 months of back assessments.

4)  Any proposed buyer must include a statement in his offer or his contract saying he will pay the fees required pursuant to ths new provision.

5)  The current language, which states that the buyer pays for up to 6 months of back assessments prior to an action to collect such assessments, shall be deleted. 

Most real estate attorneys agree that the act needs to be clarified, although they may not agree on what the clarifications should be.  Regardless, at this point the above clarifications are not law.  Let's see what happens!

First Quarter 2013 Foreclosure Roundup

According to RealtyTrac, in Illinois and around the country, foreclosures went down during the first quarter of 2013.  While Illinois' rate of foreclosure activity dropped nearly 5% from the first quarter of 2012, Illinois still ranks the third highest in foreclosure activity in the country.  Only Florida and Nevada have more foreclosures than Illinois.

Chicago, Cook County, and all of the collar counties, with the exception of DuPage County, had reduced foreclosure activity between January 1 and March 31, 2013.  DuPage County's foreclosure rate increased over both the first and last quarters of 2012.

Nationally, 152,500 properties had foreclosures filed againt them in March of 2013.  That's actually a little less than the number of new foreclosures filed in February 2012, and about 23% less than the number of new foreclosures filed in March 2012. 

Don't ignore your foreclosure!

In a recent case, OneWest Bank, FSB v. Hawthorne, 2013 IL App (5th) 110475 (February 4, 2013), the appellate court basically told a homeowner who was trying to appeal her foreclosure that she should not have ignored it for so long, and that she should have acted with diligence.

The bank filed its foreclosure on April 5, 2010, and after trying and failing to reach Ms. Hawthorne directly, filed a motion for default judgment on June 21, 2010.  Judgment was entered in the bank's favor just three days later.

That fall, Hawthorne file a motion, pro se, to have the judgment vacated.  She hired an attorney to assist her a little later.  However, neither she nor her attorney appeared in court for the hearing.  The property was eventually sold at a public auction in April 2011, and the court entered the order approving the sale in May. Shortly thereafter, Hawthorne tried to get the court to reconsider the order approving the sale, but she was not successful.  Thus the matter went to the appellate court.

Citing Malkin v. Malkin, 301 Ill. App. 3d 303, 310 (1998), the appellate court stated that in order to vacate a judgment, the appellant must show a meritorious claim or defense and diligence in pursuing that claim or defense both before and after the judgment.  Based on the facts of the case, the court decided that not only did Hawthorne not have a valid defense or claim, but that she had not been diligent in pursuing any purported defense or claim anyhow. 

The court affirmed the circuit court's judgment in favor of the bank.

So if you are being foreclosed, what should you take away from this?  Don't ignore the foreclosure, especially if you want to try to keep your home.  The bank may foreclose you whether or not you do something about it, but if you don't do anything at all, the bank will foreclose you quickly and you could lose any valid claims or defenses you have.