On January 17, the CFPB published a blog post highlighting the resurgence of “zombie” second mortgages — instances where homeowners thought their second mortgage had been modified along with their first mortgage, discharged in bankruptcy, or forgiven — still existed. Some homeowners have allegedly faced foreclosure notices and collection demands from entities claiming to have the right to collect on these forgotten loans, even when homeowners had not received communications from servicers about these loans for years. The CFPB’s investigation revealed many servicers failed to send required periodic statements, with some homeowners last receiving statements in 2015 or earlier. The CFPB noted in its blog post that under TILA and RESPA, servicers must provide periodic statements and notices of ownership transfers; charging off a loan does not exempt a servicer from these requirements unless proper notice has been given and no further fees or interest are charged. Additionally, servicers attempting to collect on zombie second mortgages may be in violation of the FDCPA and Regulation F based on a 2023 Advisory Opinion issued by the Bureau.
