There has been an increase in "zombie foreclosures," a legal gray area affecting millions of Americans, which is forcing homeowners to deal with fines, liens and mountains of debt.
The collapse of the housing market brought on a wave of foreclosures and delinquent mortgages, but currently nearly two million homes are stuck in what's been called a "zombie foreclosure," according to RealtyTrac.
When banks send out a foreclosure notice, the homeowner is left with few options. They can either take the mortgage holder to court, come current on the debt or vacate the premises. The last option is chosen the majority of the time, with homeowners unable to fulfill their financial obligations.
But the banks do not always follow through with the foreclosure process usually because the value of the home is not worth the bank taking over the property. When this happens, many home owners have already left the property and are not aware that they still legally own the house and are still responsible for the financial obligations.
Many of these homes are in low-income communities where foreclosures are difficult to sell, meaning lenders will stop taking over the property to eliminate costs they would be responsible for such as taxes and other costs related to property upkeep.
Zombie foreclosures have become a growing issue following the housing bust. Banks claim that they have sent letters to inform the home owner that the foreclosure was not pursued and to warn them that they still own the home, but many homeowners claim they never received such a notice.
"Many homeowners leave their homes during the foreclosure process assuming they are doing the honorable and morally right thing," Allan S. Glass, president of ASG Real Estate, told Forbes.
"The unfortunate risks they assume are that someone takes possession of their home, damages the home causing additional loss, or that the house lingers in disrepair until it becomes a nuisance to their neighbors and city. All of these things could lead to a greater loss financially for the homeowner, or worse yet potential legal liability," he added.