{"id":6602,"date":"2025-06-23T06:49:46","date_gmt":"2025-06-23T10:49:46","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=6602"},"modified":"2025-06-23T06:49:49","modified_gmt":"2025-06-23T10:49:49","slug":"connecticut-beats-down-zombie-mortgages","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/connecticut-beats-down-zombie-mortgages\/","title":{"rendered":"Connecticut Beats Down Zombie Mortgages"},"content":{"rendered":"\n
\"\"<\/figure>\n\n\n\n

What if you survived the foreclosure crisis back in 2008\u2026and all of the sudden, now, a bank turned up and told you it\u2019s time to pay back the balance related to a second lien<\/a> that you thought was written off, a loan you never repaid?<\/p>\n\n\n\n

This is no joke. As home values soar, lenders and collection agencies have renewed interest in decades-old home loans, and determining that it\u2019s worthwhile to attempt foreclosures.<\/p>\n\n\n\n

This month, Connecticut enacted a law to deal with loans that have risen from the dead. It would impose a ten-year statute of limitations for zombie mortgages on home properties with one to four households. The governor signed the bill on June 10, 2025.<\/p>\n\n\n\n\n\n\n\n

Dusty, Musty, Long-Ago Loans<\/h2>\n\n\n\n

Zombie mortgage<\/em> refers to a loan for which the deed holder hasn\u2019t seen a bill or statement in years. Then, out of the blue, comes a foreclosure. Typically, this affects deed holders who got two mortgages so they could avoid a down payment. Or they got a mortgage and later got a home equity loan as a second mortgage.<\/p>\n\n\n\n

After the housing bubble burst in 2008, many loans were written off. Borrowers who took out 20% loans in addition to 80% mortgages stopped receiving bills for the second loans. Some borrowers were told not to be concerned about the loans. They were relieved. They moved on with their lives.<\/p>\n\n\n\n

But those same loans were reassigned \u2014 sold to other financial companies. As they stopped getting billed, borrowers might well have figured their obligations were released. Back then, of course, homes were nowhere near as valuable as they are today. Many properties weren\u2019t worth the lenders\u2019 time and money to pursue in court. After all, a second mortgage has a lower lien priority than a first mortgage. So unless a lot of proceeds would come out of a foreclosure, lenders for second mortgages would not get much from a legal action.<\/p>\n\n\n\n

But the loans didn\u2019t simply go away. These were high-interest loans, and the debts snowballed. It happened out of sight, out of mind. Borrowers wouldn\u2019t even know where the loans had been directed.<\/p>\n\n\n\n

A few years ago, financial companies began chasing down the old liens. Debt collectors started demanding the outstanding balances with heaps of fees and interest. (This violates federal law, unless the deed holder has received written statements laying out what\u2019s due.) Companies threatened deed holders with foreclosure actions unless they got their repayments. Deed holders were shocked. They thought the debt collectors were scam artists. And then foreclosure agents showed up at homes.<\/p>\n\n\n\n

Zombies of Connecticut<\/h2>\n\n\n\n
\"\"<\/figure>\n\n\n\n

Last year, the rise of the zombie loans<\/a> and their armies of debt collectors became national news. What\u2019s happened so far could be the tip of the iceberg.<\/p>\n\n\n\n

Hundreds of zombie loans could be lurking in Connecticut alone. Well, hadn\u2019t the financial companies dropped their side of the contracts? That is the position of state Republican Senator Eric Berthel. If they hadn\u2019t kept up with collections, then surely the companies dropped the ball \u2014 not the borrowers. People shouldn\u2019t be forced to resolve these old loans now, after the lenders had essentially abandoned the accounts for over a decade, Berthel insisted. Berthel says this position won clear support from real estate brokers and financial professionals.<\/p>\n\n\n\n

So, Berthel supported Connecticut Democratic Sen. Patricia Billie Miller, who introduced a bill meant to prevent this from happening \u2014 at least in the case of future loans. Senator Miller acted on the issue when a constituent got caught up in one of these second-loan scenarios. Miller, who is Senate chair of the Banking Committee, calls collections on reassigned, stale second mortgages a \u201cpredatory practice.\u201d<\/p>\n\n\n\n

Republican State Senator Rob Sampson disagrees. Sure, the lenders sat on the loans, but that was their prerogative. \u201cI don\u2019t think that should negate their right to recover money that\u2019s been promised to them,\u201d said Sampson.<\/p>\n\n\n\n

But if you don\u2019t even know someone has your loan, Miller countered, \u201chow are you going to pay them?\u201d Let\u2019s be fair. Loan terms aren\u2019t indefinite. There has to be an appropriate statute of limitations to stop collections companies from going after deed holders after these companies sit on their rights for years.<\/p>\n\n\n\n

Nuts and Bolts of the Law<\/h2>\n\n\n\n

Connecticut\u2019s new law, An Act Concerning Foreclosures and Undischarged Mortgages<\/a>:<\/p>\n\n\n\n