Zombie Mortgages: CFPB Warns Against Illegal Time-Barred Debt Collection

Officials at the Consumer Financial Protection Bureau have issued a reminder about zombie mortgages, saying threatening homeowners regarding uncollected time-barred debts violates the Fair Debt Collection Practices Act. The guidance warns that it is illegal for debt collectors to threaten foreclosure on silent second mortgages with statutes of limitations that have expired. “Some debt collectors, who sat silent for a decade, are now pursuing homeowners on zombie mortgages inflated with interest and fees,” said CFPB Director Rohit Chopra. “We are making clear that threatening to sue to collect on expired zombie mortgage debt is illegal.” The CFPB points to “piggyback” mortgages in particular, also known as 80/20 loans. Homebuyers would be given a first lien loan for 80% of the…