A WOMAN’S home of almost two decades is being sold and it all happened after receiving a strange knock on the door.
Karen McDonough was having a cup of tea at her home in Quincy, Massachusetts — about nine miles south of Boston — when she saw something unusual outside her window.
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“There were about 20 cars, and they all came at the same time and parked in front of my house, across the street, up the street,” she said. MPR News.
“I had the feeling that something really bad had happened… like someone in the neighborhood had died.”
She had no idea she would be involved in the ordeal.
McDonough went outside and approached a group of men to ask what was going on.
“He had a piece of paper and I said, ‘What’s going on?’ And he said, ‘We’re selling your house.'”
The commotion was actually a foreclosure auction of the home she had owned for 17 years.
McDonough, who raised her two children at home and made a point of paying her mortgage every month, was shocked.
During the 2008 housing crisis, McDonough asked for a modification on her mortgage — like millions of other homeowners.
She said her mortgage company told her the second mortgage on the home had been forgiven as part of the modification, which McDonough believed to be true because she stopped taking statements for more than 10 years.
Recently, however, she received phone calls demanding money and believed it was a scam.
Yet these men on her lawn were telling her, “This is a foreclosure. You’re going to lose this house,” McDonough said.
It turns out that McDonough was the victim of a zombie second mortgage.
Many homeowners believe these loans are long gone; however, they come back to life because they are created by debt collectors.
These companies will also add retroactive interest and fees before foreclosing on people’s homes.
McDonough purchased the home in 2005 after her divorce and found the $365,000 price tag was affordable with her income as a nurse.
“I thought the size was kind of charming… It had a little yard,” she said. “I thought it would be perfect.”
Despite having decent savings, McDonough didn’t save for a large down payment on a house.
When the housing bubble was about to burst, mortgage companies found ways to lend moneywhich included the elimination of down payments and instead, lenders granted two mortgages.
The first loan covered 80% of the home’s value, while the second covered the remaining 20% - these were called 80/20 loans.
“It was the easiest thing I’ve ever applied for,” McDonough said.
“I just filled out the paperwork and submitted it and I was approved.”
Her first mortgage was for $292,000 and her second was for $73,000 for the two-bedroom house where she lived with her two children.
What does it mean for a house to be placed in foreclosure?
Foreclosures can happen when lenders take control of a property after borrowers have failed to make their payments.
Homeowners or borrowers will receive a Notice of Default from their lender, triggering the foreclosure process.
Those in HOA communities may also find their homes foreclosed by their HOA for late fees, meaning that even if you continue your mortgage payments, you could still lose your home.
Before foreclosure, an HOA will place a lien on your property, which will allow it to be auctioned off to recover unpaid funds.
The property’s sales price can often be much less than it is worth, as it only needs to be enough to cover debts owed to the HOA or lender and is sold at auction to the highest bidder.
But when the world entered the worst financial crisis in decades, McDonough didn’t know what to do until his mortgage company told him the second mortgage was forgiven.
McDonough believed the loan was past due, however, in 2020 she received a letter in the mail from First American National saying she owed money.
“There was an amount and they wanted a payment… something like $77,000,” she said. “I was kind of in disbelief.”
McDonough ignored the warning, believing it to be a scam, however, First American National continued calling and threatening to foreclose on his home.
Fed up, she called the company handling her first mortgage for advice; however, a representative also believed the strange calls were fraudulent.
“I was crying on the phone with them, like I was having a nervous breakdown,” McDonough said.
“And they kept saying we’re going to help you. You can’t lose your house with this.”
However, mortgage company McDonough told the outlet it found no record of that conversation.
What is a zombie mortgage?
A zombie mortgage is a mortgage debt that was believed to have been forgiven or paid off long ago, but still exists.
These old debts can be written off by the creditor and sold, often for pennies on the dollar, to debt collectors.
Sometimes mortgage companies stop sending payments and homeowners believe the debt is dead.
However, debt collectors arrive years later to collect the debt.
As property values increase, debt collectors threaten foreclosure and other collection actions while asking for the outstanding balance – plus fees and interest.
Source: Consumer Finance
In 2021, First American National made the steps to foreclose on McDonough’s home, auctioning it off and purchasing it for $178,500.
A few months later, McDonough said she received an eviction notice on her front door.
“I am not to sleep, and I started packing everything,” she said. “I was crying for three days straight. I just packed my bags.”
McDonough filed a lawsuit claiming her second mortgage was forbearance and that she was told the debt collection was likely a fraud.
“We think they systematically and deliberately broke the law,” said McDonough’s attorney, Todd Kaplan.
At the time of this writing, she is still living in her home and continues to pay her mortgage.
“It’s still my home,” she said. “On principle… it’s still my home.”
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This story originally appeared on The-sun.com read the full story
