Teresa is a single mother from Los Angeles. She had never heard of Staybridge Company until she got a letter in January saying she owed them $180,000.
The notice told her that she needed to make a $50,000 down payment right away or risk losing her house. Who did it? She thought she had paid off her old second mortgage years ago.
She told CBS Teresa (she asked that her last name not be used) changed her mortgage loan after getting divorced in 2009. She said she never got a monthly bill for her second mortgage. She thought that it had been added to her main mortgage payment.
She said, “It’s really scary.” “To know that there may come a time when we need to move.” And because of how much homes cost and how much rent costs in southern California… It’s too expensive for me to live in California if I can’t stay in my current home.
Teresa tried to talk things out with the company, but Statebridge says they won’t talk about the 15-year-old debt right now.
Teresa is one of more and more Americans who have what are called “zombie mortgages.” These are second mortgages that come back even after the borrower thinks they’ve paid them off. These mortgages are often sold to debt collectors, who then demand payment months or even years later, often with interest and fees added on top of what was owed.
A lot of those borrowers, including Teresa, thought the loans were over years ago and hadn’t been told that they were still being paid.
“This didn’t look like anything I knew when I looked at it.” Teresa told CBS News, “I didn’t know where it came from.”
Teresa says that from 2009 to January 2024, she never got a bill or message about this debt. Some lenders don’t send loan records, even though federal law says they have to.
It’s a problem all over the country. NPR looked into it and found that at least 10,000 old second mortgages in New York have been foreclosed on in the last two years.
NPR also found at least 500 loans in Maryland that had not been paid for more than ten years. However, a company has now taken the first step toward collection.
Before we go any further, it’s important to know that zombie mortgages are second mortgages. You can borrow against the value of your home to get these loans, which are usually used for big costs like repairs, upgrades, or other improvements. Zombie debts are not a problem if you have never had a second mortgage.
If so, start with the public property records for your county. You can usually find them online for free. When you Google your city or county, type in “public property records.” This should help you find the right page.
Always check your property to see if there is a lien or notice of failure on it. You might be having trouble if there is. Most likely, the debt has been paid off if you see a deed of reconveyance.
Your tax returns are another place to look. The lender would have sent you a 1099-C, which is sometimes called a cancellation of debt if the old mortgage was thrown away. You need to include these tax forms with your tax return to show that you have gotten rid of the second mortgage.
If it looks like your house has a “zombie mortgage,” you might want to talk to a lawyer. In some places, debt collectors are not allowed to do anything after a certain amount of time. In California, for example, you only have four years to pay off most types of debt.
