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# What Is a Zombie Mortgage? How an Old Second Lien Comes Back
- URL: https://www.mortgagemomradio.com/what-is-a-zombie-mortgage-how-an-old-second-lien-comes-back/
- Published: 2023-10-18T21:00:00.000Z
- Updated: 2026-09-04T17:29:26.000Z
- Description: A second mortgage you thought was charged off. A bankruptcy you thought erased it. A loan modification that only covered the first loan. Then a collector calls, because your home finally has equity. Debbie explains where zombie mortgages come from and what never to do first.
- Author: Deborah Marcoux
- Tags: Podcast, Mortgage Mom Radio, #episode-backfill

Mortgage Mom Radio • “What is a Zombie Mortgage? Should you be concerned as a homeowner?” • Live show from Wednesday, October 18, 2023 • 30 minutes • Hosted by Debbie Marcoux, NMLS #237926

A second mortgage you were told was charged off. A bankruptcy you thought wiped it out. A loan modification you assumed covered both loans. Years of silence — and then a debt collector calls, because your home now has equity worth chasing. That's a zombie mortgage, and it's a real enough problem that the Consumer Financial Protection Bureau has a definition for it. In this Halloween-timed episode, Debbie explains where these liens came from, who is most at risk, how to find out whether one is sitting on your title, and the single most important thing not to do if a collector contacts you.

## Key takeaways

- **A zombie mortgage is a real, defined thing.** The CFPB describes zombie mortgages as mortgage debts consumers thought were forgiven or satisfied long ago that still exist — often written off by the lender and sold for pennies on the dollar to debt collectors, or simply gone quiet, with statements and communication stopping altogether. Years later a collector reaches out.
- **They almost all trace back to the 80/20 loans of roughly 2001–2007.** Buyers got a first mortgage covering 80% and a second covering 20% to reach 100% financing. When values fell in 2008–2010 and adjustable and interest-only payments reset upward, many people stopped paying the second. The second-lien holders didn't foreclose, because a foreclosure pays the first mortgage first and there was nothing left for them — so the liens just sat.
- **Two situations catch people completely off guard.** A loan modification during the crisis usually modified *only the first mortgage* — a first and a second are two separate sets of loan documents, two separate liens, two separate everything. And a bankruptcy doesn't release the lien unless your attorney filed the specific paperwork with the court to do it.
- **The reason they're back is equity.** Those liens have been sitting for years accruing interest and fees. Now that homeowners have significant equity, the collectors who bought that debt have a reason to come collect — and the debt may have been resold many times, so the company contacting you is probably not the one you originally signed with.
- **Do not make a payment before you get advice.** Statutes of limitation vary by state (Debbie looked up Arizona right before the show and found six years). If you're past your state's limit, making any payment of any size can restart the clock. Call the CFPB, a real estate attorney, or someone who can help — before you agree to any new payment arrangement.
- **The CFPB complaint portal has a foreclosure flag.** When you file a complaint on their website there's a flag you can check when the issue involves foreclosure or pre-foreclosure, so your request gets prioritized. That matters, because some of these are moving to pre-foreclosure even when the debt is past the statute of limitations.
- **You can find out in advance.** A title search will show what liens are actually recorded against your property. If you had a second mortgage and you don't know whether it was paid off, charged off, or is still recorded, that's a phone call, not a mystery you have to live with.

## Chapters

- 01:00Welcome — why zombie mortgages, and why now
- 03:00The news story that prompted the topic
- 04:00The CFPB's actual definition of a zombie mortgage
- 06:00Where they came from: 80/20 loans and 100% financing, 2001–2007
- 07:002008–2010: values drop, adjustable and interest-only payments reset
- 09:00The loan modification trap — it only covered the first mortgage
- 11:00Why second liens are riskier, and why they never foreclosed
- 12:00Interest and fees piling up quietly — and why equity brought them back
- 13:00How to check: pull a title search on your own property
- 15:00Statutes of limitation vary by state — look yours up
- 16:00The lien stays until the lender removes it
- 17:00Filing with the CFPB and the foreclosure priority flag
- 18:00The bankruptcy trap: a discharge is not a lien release
- 20:00The one thing not to do: never make a payment first
- 21:00Why people feel cornered into selling — and how to avoid it
- 24:00Wrap-up: the tools app and how to join the live show

### Not sure what's actually recorded against your home?

Call [844-935-3634](tel:8449353634) (844-WE-LEND-4) and we'll pull the property profile and title search for you, [start an application](https://www.mortgagemomradio.com/apply/), or run your numbers with the [mortgage calculators](https://www.mortgagemomradio.com/tools/). Get the weekly rundown in the [newsletter](https://www.mortgagemomradio.com/newsletter/).

Full transcript (lightly edited for clarity) 

*Auto-generated captions cleaned for readability. Commercial breaks and repeated housekeeping have been trimmed; licensing information appears at the bottom of this page.*

### Why we're talking about zombie mortgages

Welcome to Mortgage Mom Radio. I'm Debbie Marcoux, I am the Mortgage Mom — and I'm sorry, everyone, this is take three, so hopefully the third time is the charm on getting our sound and video working. You get to watch me do this over and over until I get it right, which you only see if you join us live.

Today we're talking about zombie mortgages. Halloween is around the corner, and my mother-in-law sent me an article a couple of days ago about a couple dealing with a zombie mortgage coming back to haunt them. So I figured: Halloween, zombies, zombie mortgages — what better topic? What is it? Do you need to worry about it? Are you a homeowner who had a second mortgage that at some point you thought was discharged, or thought was charged off? Then this is a great topic for you.

In that article, a couple had a second lien on their home at one point. They thought it got charged off — they were even told by one of the companies holding the debt that it was charged off and they no longer owed it. And then it came back to haunt them.

### What the CFPB says a zombie mortgage is

Believe it or not, “zombie mortgage” is a real thing with a real definition. I pulled it from the Consumer Financial Protection Bureau's website — they're the ones who govern our lending laws and rules and make sure we're all doing everything the right way. Here's what they say.

Zombie mortgages are mortgage debts that consumers thought were forgiven or satisfied long ago, but that still exist. The debts may have been written off by the lender and sold for pennies on the dollar to debt collectors. Alternatively, the mortgage company may have simply gone silent and stopped sending statements or communicating with the borrower altogether. Years later, a debt collector reaches out to collect on the debt. Because these mortgages are reappearing after being considered dead or gone for so long, they're sometimes called zombie second mortgages.

Before the Great Recession in 2008, mortgage lenders sometimes sold borrowers two mortgages for the same property instead of one — for example, a primary mortgage covering 80% of the loan and a second mortgage covering the remaining 20%. As the Great Recession hit and the economy shrank, people had trouble making mortgage payments. Many borrowers got loan modifications or declared bankruptcy. Some lenders ceased to exist and sold off their loans, while others wrote off the second mortgages, not expecting to be paid because of falling home prices. Some borrowers no longer received mortgage statements on their second mortgages — in fact, many heard nothing about their second mortgage for more than ten years. Now, years later, debt collectors are pursuing borrowers on these smaller second mortgages. As property values rise, the debt collectors who bought these are looking to collect.

I think they did a great job explaining it. But let's go back through that history the way they did.

### Where these liens came from

Many, many borrowers — especially through 2001 to 2007 — got an 80% first mortgage and a 20% second mortgage to get into a home with 100% financing. They owed 100% of what they paid for the house.

Then in 2008, 2009, 2010, property values swiftly declined. Your home was no longer worth what it had been, especially if you bought between 2005 and 2007 — you owed more on the house than it was worth. Even if you'd put a significant down payment down, you barely had enough equity to cover the mortgage, so you lost the money you put in.

And a lot of those mortgages were adjustable-rate or interest-only. If you bought in 2005, your rate started adjusting around 2010\. If you bought in 2001, it started adjusting in 2007 or 2008\. Interest rates went up significantly in 2007 and 2008\. They came down a bit in 2009, but we really didn't start to see genuinely good rates until about 2010 or 2011\. So during exactly those years, those adjustable payments went up, and it was difficult for a lot of borrowers to make payments — especially on two loans instead of one. So many people just stopped paying the second mortgage.

### The loan modification trap

We run across this all the time on applications. A lot of borrowers did loan modifications during those years. They couldn't refinance — they owed more than the house was worth — so they reached out to their mortgage company for a modification.

In their mind, the same loan officer and the same mortgage company had done their purchase and given them 100% financing. Even though they signed two separate mortgages, it *felt* like one mortgage. So they called the 800 number on the statement, the company servicing their loan, and got a loan modification done. What they didn't realize is that the modification was for the first mortgage. It was not the second.

A first and a second are completely separate. Two separate sets of loan documents, two separate liens, two separate everything. So people thought they had it all put together, corrected, taken care of, that they were making good on their debt — and they didn't realize the second mortgage was still out there. Still owed. Still a lien. Still due.

Other clients knew it was there, stopped paying, and didn't get much hassle — no foreclosure notices, no pre-foreclosure notices. They got a stack of bills saying it was past due, then something saying “charged off,” and figured it was gone.

### Why the second-lien holders stayed quiet

This is why we talk about the position of home equity lines and home equity loans. The first mortgage takes the cake — they're number one on the lien and they get paid off first. The second mortgage is lien number two, and they only get paid if there's money left after the first is satisfied. That's why home equity lines and loans carry higher interest rates: they come in second place.

So during the years when values dropped and people were upside down and foreclosing or modifying, a lot of those second mortgages didn't get paid. They stayed on the books, and the second-mortgage companies did not come after their money — because if they started foreclosure proceedings, the first mortgage gets paid off first and there'd be nothing left for them. So all of those second mortgages have been sitting there, festering, for all these years.

And what are they doing while they sit? Building interest, building fees, building all kinds of things on a debt you owed and don't even realize is there. But now that there's so much equity out there, all of a sudden these companies are coming back to collect.

It might not be the original company you signed with. Remember, when any debt goes bad — a medical collection, a credit card, a personal loan — it can be sold, and it can be sold over and over again to different collection companies. A lot of these have been sitting, and now that people have equity you're seeing these debt collection companies come out of the woodwork.

### How to find out whether one is on your title

If you had a second mortgage and you don't know whether it was paid off, whether it was charged off, whether it still exists, whether it's a lien on your title report — you can always call us. We'd be happy to do the research, tell you what we see on your property profile, pull a title search and let you know if there's anything there. Then you can get proactive about taking care of it.

### Statutes of limitation — and the lien that outlasts them

Statutes of limitation vary by state, so look up what it is where you live. I looked up Arizona very quickly right before we started and it was six years. Part of what's happening is that these debts are well past that — and they're still coming back.

What makes it difficult is that it's still a lien filed against the property, and the lien stays there until it's removed. In order for it to be removed, the lender has to remove it.

So if you find that you've got a second lien tied to your property that's older than your state's statute of limitations, the first thing to do is reach out to the CFPB — the Consumer Financial Protection Bureau. On their website there's a place to file a claim, and when you're filing there's a flag you can check when it has to do with foreclosure or pre-foreclosure, so they can prioritize your request. That was one of the most helpful things I read and I wanted to make sure everyone knows it.

### The bankruptcy trap

A lot of people had bankruptcies back then. We all went through hell and back during those years, and many people thought their second mortgage was removed in the bankruptcy. If your bankruptcy attorney did not get the lien released — and there are specific forms that have to be filed with the court to do that — then that lien could still be sitting there.

That loan never comes out of the bankruptcy. It could be five years, it could be ten years; the loan is still part of that bankruptcy, which means they cannot collect on it. So you may have heard nothing for years. You could have filed ten or fifteen years ago and think that equity line is gone — and then you go to refinance or to sell, and the lien is still there. To close, to pass clear title to the next buyer, or to get a new title insurance policy on a refinance, that lien has to be paid off.

So if you had a bankruptcy during those years and you've never checked — maybe you had no reason to refinance through 2020 and 2021 — reach out. Let's pull it up and see what liens are there. If it does still exist, it could be too late to do much; I'm not a bankruptcy attorney and I don't know the limitations on those timelines. But you may want to go back to that bankruptcy attorney and ask whether there's anything they can do to get the lien removed. We've run into this quite a few times, where people thought it was gone and it wasn't.

One difference worth knowing: in a bankruptcy the lien generally isn't going to get sold and resold. It's just going to sit there for a very long time, until you go to sell the home and suddenly have to pay off something you didn't know existed. For the debts that simply went bad and were never paid, those do get resold over and over to different collection agencies buying bad debt and hoping to collect something.

### The one thing not to do

This is the most important thing I read and I want to pass it along. If you're past your state's statute of limitations, the last thing you want to do is make a payment of any kind toward that debt. The minute you make a payment, your statute of limitations starts over again.

So if you find there's a lien against the property, or somebody comes to collect on a debt you didn't realize still existed — the first thing to do is reach out to somebody. Reach out to the CFPB. Reach out to a real estate attorney. Reach out to someone who can help you. Do not go into some sort of new monthly payment arrangement.

It could end up being something you have to do — I'm not telling you never to make payments. I'm telling you to protect yourself. Make some phone calls and talk to some people before you get yourself into a new payment arrangement or make any payment at all, because you'll be starting yourself all over again.

I don't personally know the exact steps to fight it, but I do know it's very hard, and that these are popping up. People are finding that even past the statute of limitations, pre-foreclosure is getting started and the home could get sold out from under them. They didn't even know the debt was still there, and they feel cornered — like they have to list the home and sell it so they don't end up with a foreclosure on their record and lose the equity they still have.

So protect yourselves. If you don't know whether something exists, if this story sounds familiar — you had a second mortgage, you thought it went away, you filed bankruptcy and thought that took care of it — reach out. Let us do some research, pull up what we can see from a title search, and give you that information. If a lien does need to be paid off, we can help from there, whether that's a new refinance or renegotiating with the collection company. We want to make sure you're taking the right steps forward.

### Wrap-up

Before I close: it's been a while since I mentioned the Mortgage Mom Radio tools app. This is different from our loan application app in the Apple Store and Google Play. The tools app is for when you're not quite ready to apply — it runs VA, FHA and conventional payments, calculates mortgage insurance, property taxes and homeowners insurance, and has an affordability calculator where you enter your debts and monthly income to get an idea of what you'd qualify for. There's an “email Debbie” button right in it, so if you don't know what to plug in for property taxes or insurance, email me and I'll give you the average numbers to use. To get it, text the two words PHONE APP — that's it, just “phone” space “app” — to 844-935-3634\. If you send anything else you won't get the automated reply.

To know when I go live and be part of the show, text the word MOM to that same number, 844-935-3634 — 844-WE-LEND-4\. One text a week with the topic and a link to join, and the same number reaches our office. You can also go to mortgagemomradio.com — don't forget the “radio” — to book an appointment or send me a message directly. We have team members across time zones, so if you need early mornings, evenings, or weekends, tell us and we'll work with you.

That wraps up our zombie conversation for the month of October. I'll be back next week, right here, Wednesday at one o'clock on YouTube. Talk to you all real soon.

Debbie Marcoux is licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, NMLS ID #237926, and additionally licensed in AZ (0941504), FL, GA, HI, ID, IL, NV, NC, OR, TN, TX, and WA. Rates and figures discussed were current as of the air date of October 18, 2023, reflect national conforming averages, and are not an offer of credit or a rate quote. Debbie Marcoux is not a financial advisor; consult qualified professionals about your individual situation.