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Rise of the zombie house

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When a bank files a motion to set aside a foreclosure judgment, often the courts consider the filing good news, assuming the lender and the homeowner have reached a settlement.

But things aren’t always what they seem, and courts can be at risk of being duped.

While a lending institution may give the impression to the judge that a settlement agreement has been reached, homeowners are often unaware that the scheduled sheriff’s sale did not happen or that a motion to vacate has been filed. The result can be abandoned properties falling into disrepair; cities unsure of who actually owns the eyesores; and homeowners, unknowingly, accruing past-due bills for taxes, interest and mortgages that they unlikely will be able to pay.

boyer-nancy.jpg Boyer

Notre Dame Law School Clinical Professor Judith Fox examined this phenomenon, what she called the “foreclosure echo,” in a 2013 article published in the Loyola Consumer Law Review. She looked at the impact that a bank’s often inexplicable decision to “un-foreclose” has on the judicial system as well as homeowners and communities.

“One thing I hope happens from my paper is that judges would just ask questions and just pay more attention,” Fox said.

The physical remains of these foreclosure reversals have been given nicknames that identify their scary implications – zombie home and zombie title.

Zombie homes arise when homeowners move out and abandon the dwellings, thinking the foreclosure process is completed or near completion. Zombie titles come to life after the foreclosure is finished but the lender returns with a motion to set aside the judgment.

Allen Superior Judge Nancy Eshcoff Boyer has seen the zombie homes in Fort Wayne neighborhoods and the attempts to create zombie titles in her courtroom.

“It’s getting to be a bigger problem,” Boyer said of zombie titles.

Motions to set aside a foreclosure judgment are coming anywhere from three months to, in one instance, seven years after the decrees were issued. The reasons given for the motion can be cryptic, so after she and her clerks became suspicious, Boyer started to routinely schedule hearings to find out why the lenders want to vacate the judgment.

Asking questions, Boyer said, is helping to prevent these homes from becoming problems for the community. Often in a foreclosure, the borrower will leave the house and with no one maintaining the property, the grass becomes overgrown, and vandals deface and strip the home.

The house then becomes a blight on the neighborhood. Eventually, the property will deteriorate to the point where the municipality has to demolish the home, which costs the taxpayers.

“That is really the reason I’m looking at these (motions) because I don’t want (the houses) thrown back on our community,” Boyer said.

Nobody’s home

Indiana is a leader nationwide in the percentage of foreclosed homes being vacated by owners.

manier Manier

The Hoosier state ranked ninth in January 2014 in the number of properties in foreclosure at 14,503, according to statistics from RealtyTrac, a California-based company that reviews housing data from across the country. However, with 31 percent of those homes vacated by the owner, Indiana has the seventh-highest number of zombie homes.

From September 2013 to January 2014, Indiana’s percentage of owner-vacated homes had declined by 12 percent.

In many instances what homeowners might not realize is that even though the bank foreclosed and they moved out, they still own the property.

Fox encountered this situation when a woman walked into Notre Dame’s Economic Justice Project, the consumer clinic that Fox supervises, with a notice from the city of South Bend that her home was in violation of building codes. The client explained she had appeared in St. Joseph Superior Court two years earlier and agreed to the foreclosure. When she received the notice of the upcoming sheriff’s sale set for June 2007, she moved.

Assuming the city had made a mistake, Fox made a phone call to resolve the matter but discovered there was no mistake. The lender had the court set aside the judgment and the homeowner was never notified. The woman who thought the foreclosure was finished learned she was, in fact, still responsible for the property.

Like her colleague in Allen County, St. Joseph Superior Judge Jenny Pitts Manier has been dealing with a “steady stream” of motions to set aside foreclosure judgments. Her approach has changed from assuming the motion means the foreclosure has been remedied by either a settlement or a short sale to getting a legal basis for the filing.

“My concern is people are evicted from their homes and then we’re saying, ‘Oh, forget it,’” Manier said.

If the motion does not provide a reason why the lender is filing or if the reason is vague, Manier finds time on her calendar to bring the attorneys to the courtroom.

“In this environment, it’s not a bad idea to set a hearing,” she said.

Adhering to the rules

The Office of the Indiana Attorney General has occasionally received complaints about zombie titles but currently there is little legal recourse available if the lender starts but does not complete the foreclosure proceeding and leaves the house in limbo.

Bryan Corbin, spokesman for the attorney general’s office, acknowledged the negative ramifications for neighborhoods and homeowners. He also pointed out that under current law, lenders are not legally obligated to inform the mortgage holders the foreclosure judgment has been dismissed or the process stopped.

In her research, Fox has found that lenders rarely supply reasons, let aloneaccurate ones, for wanting to set aside a foreclosure judgment. Most commonly, the language implied a settlement had been reached with the homeowner.

fox Fox

Both Boyer and Manier said they will vacate judgments when the lender and homeowner have crafted an alternative to foreclosure or when the reason satisfies Trial Rule 60(B), which spells out the valid reasons – such as mistake, fraud or to correct error – for setting aside a decree.

Unless Boyer and Manier receive the proper legal grounds, they will not set aside the judgment.

When Boyer began scheduling hearings, she met resistance. Lenders called her, asking why she was doing such a thing. The pushback reminded the Allen County judge of the opposition she got from lenders during the height of the foreclosure crisis who complained the state-required settlement conferences were ruining their business models.

Hearings may prevent lenders from tossing abandoned houses onto the shoulders of the community but, Boyer said, they do have a consequence for the courts. Namely, scrutinizing the motions and holding hearings use judicial time and resources, which are limited.

Still, she has noted since she started setting hearing dates, she is getting more answers to her questions about the motions to set aside. And that, she believes, translates into the courts helping to stop the zombies.•

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  1. Yes diversity is so very important. With justice Rucker off ... the court is too white. Still too male. No Hispanic justice. No LGBT justice. And there are other checkboxes missing as well. This will not do. I say hold the seat until a physically handicapped Black Lesbian of Hispanic heritage and eastern religious creed with bipolar issues can be located. Perhaps an international search, with a preference for third world candidates, is indicated. A non English speaker would surely increase our diversity quotient!!!

  2. First, I want to thank Justice Rucker for his many years of public service, not just at the appellate court level for over 25 years, but also when he served the people of Lake County as a Deputy Prosecutor, City Attorney for Gary, IN, and in private practice in a smaller, highly diverse community with a history of serious economic challenges, ethnic tensions, and recently publicized but apparently long-standing environmental health risks to some of its poorest residents. Congratulations for having the dedication & courage to practice law in areas many in our state might have considered too dangerous or too poor at different points in time. It was also courageous to step into a prominent and highly visible position of public service & respect in the early 1990's, remaining in a position that left you open to state-wide public scrutiny (without any glitches) for over 25 years. Yes, Hoosiers of all backgrounds can take pride in your many years of public service. But people of color who watched your ascent to the highest levels of state government no doubt felt even more as you transcended some real & perhaps some perceived social, economic, academic and professional barriers. You were living proof that, with hard work, dedication & a spirit of public service, a person who shared their same skin tone or came from the same county they grew up in could achieve great success. At the same time, perhaps unknowingly, you helped fellow members of the judiciary, court staff, litigants and the public better understand that differences that are only skin-deep neither define nor limit a person's character, abilities or prospects in life. You also helped others appreciate that people of different races & backgrounds can live and work together peacefully & productively for the greater good of all. Those are truths that didn't have to be written down in court opinions. Anyone paying attention could see that truth lived out every day you devoted to public service. I believe you have been a "trailblazer" in Indiana's legal community and its judiciary. I also embrace your belief that society's needs can be better served when people in positions of governmental power reflect the many complexions of the population that they serve. Whether through greater understanding across the existing racial spectrum or through the removal of some real and some perceived color-based, hope-crushing barriers to life opportunities & success, movement toward a more reflective representation of the population being governed will lead to greater and uninterrupted respect for laws designed to protect all peoples' rights to life, liberty & the pursuit of happiness. Thanks again for a job well-done & for the inevitable positive impact your service has had - and will continue to have - on countless Hoosiers of all backgrounds & colors.

  3. Diversity is important, but with some limitations. For instance, diversity of experience is a great thing that can be very helpful in certain jobs or roles. Diversity of skin color is never important, ever, under any circumstance. To think that skin color changes one single thing about a person is patently racist and offensive. Likewise, diversity of values is useless. Some values are better than others. In the case of a supreme court justice, I actually think diversity is unimportant. The justices are not to impose their own beliefs on rulings, but need to apply the law to the facts in an objective manner.

  4. Have been seeing this wonderful physician for a few years and was one of his patients who told him about what we were being told at CVS. Multiple ones. This was a witch hunt and they shold be ashamed of how patients were treated. Most of all, CVS should be ashamed for what they put this physician through. So thankful he fought back. His office is no "pill mill'. He does drug testing multiple times a year and sees patients a minimum of four times a year.

  5. Brian W, I fear I have not been sufficiently entertaining to bring you back. Here is a real laugh track that just might do it. When one is grabbed by the scruff of his worldview and made to choose between his Confession and his profession ... it is a not a hard choice, given the Confession affects eternity. But then comes the hardship in this world. Imagine how often I hear taunts like yours ... "what, you could not even pass character and fitness after they let you sit and pass their bar exam ... dude, there must really be something wrong with you!" Even one of the Bishop's foremost courtiers said that, when explaining why the RCC refused to stand with me. You want entertaining? How about watching your personal economy crash while you have a wife and five kids to clothe and feed. And you can't because you cannot work, because those demanding you cast off your Confession to be allowed into "their" profession have all the control. And you know that they are wrong, dead wrong, and that even the professional code itself allows your Faithful stand, to wit: "A lawyer may refuse to comply with an obligation imposed by law upon a good faith belief that no valid obligation exists. The provisions of Rule 1.2(d) concerning a good faith challenge to the validity, scope, meaning or application of the law apply to challenges of legal regulation of the practice of law." YET YOU ARE A NONPERSON before the BLE, and will not be heard on your rights or their duties to the law -- you are under tyranny, not law. And so they win in this world, you lose, and you lose even your belief in the rule of law, and demoralization joins poverty, and very troubling thoughts impeaching self worth rush in to fill the void where your career once lived. Thoughts you did not think possible. You find yourself a failure ... in your profession, in your support of your family, in the mirror. And there is little to keep hope alive, because tyranny rules so firmly and none, not the church, not the NGO's, none truly give a damn. Not even a new court, who pay such lip service to justice and ancient role models. You want entertainment? Well if you are on the side of the courtiers running the system that has crushed me, as I suspect you are, then Orwell must be a real riot: "There will be no curiosity, no enjoyment of the process of life. All competing pleasures will be destroyed. But always — do not forget this, Winston — always there will be the intoxication of power, constantly increasing and constantly growing subtler. Always, at every moment, there will be the thrill of victory, the sensation of trampling on an enemy who is helpless. If you want a picture of the future, imagine a boot stamping on a human face — forever." I never thought they would win, I always thought that at the end of the day the rule of law would prevail. Yes, the rule of man's law. Instead power prevailed, so many rules broken by the system to break me. It took years, but, finally, the end that Dr Bowman predicted is upon me, the end that she advised the BLE to take to break me. Ironically, that is the one thing in her far left of center report that the BLE (after stamping, in red ink, on Jan 22) is uninterested in, as that the BLE and ADA office that used the federal statute as a sword now refuses to even dialogue on her dire prediction as to my fate. "C'est la vie" Entertaining enough for you, status quo defender?

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