A few years ago, TV stock analyst Jim Cramer advised people who are more than 20% upside-down on their home mortgages to simply “walk away.” This flippant advice sounds good on the surface, but defaulting on your home loan and “walking away” from the home can have unforeseen consequences. When you walk away from your home before the bank has completed its foreclosure process on the home, you have continuing responsibilities and obligations as the legal owner.
Many home owners are discovering the problems with the “just walk away” advice. Until the bank receives legal title to your home, you continue to own it. That means you are responsible for upkeep, like lawn care and home maintenance, and may be cited for criminal neglect – even if you no longer live in the home! You may also be responsible for damage to the home from looters. You are responsible for home owner or condo association fees, insurance, and taxes.
There is no legal recourse to make a bank foreclose on your home. There is also no way to transfer title without the bank’s consent (including a quit claim deed back to the bank). Many banks see a foreclosed home as a huge burden because once it receives title and legal ownership, the bank is responsible for maintenance, costs and liability until it is sold to a new owner. More and more banks are choosing to not foreclose, and thousands of homes abandoned by their owners are now sitting vacant.
The press has taken to calling these abandoned homes “zombie houses,” that may be “dead,” but are still dangerous. Even bankruptcy does not transfer title to a zombie house that no one wants. Many debtors are surprised to learn that the bankruptcy court has no authority to force a bank to foreclose or accept transfer of title. If you plan to surrender your home during bankruptcy, you still own it until the bank forecloses.
If you have been threatened with foreclosure, don’t listen to advice from TV “financial experts!” Speak with an experienced attorney and discuss your options.