‘Zombie foreclosures’ jump in nearly every state

The uptick is a potential ‘red flag,’ according to experts

While the government is working on measures to shield homeowners from the financial effects of a coronavirus-related recession, a certain type of foreclosure jumped in nearly every state in the third quarter.

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According to data from ATTOM Data Solutions, 216,000 homes were in the process of foreclosure  including about 7,960 (or 3.7%) as so-called zombie foreclosures.

A zombie foreclosure refers to a property that has been vacated by the owner once the foreclosure process began, but the property remains in the homeowner's name.

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Those instances were up 3%  from the second quarter, even though the overall number of homes in the process of foreclosure declined 16%.

Vacated properties in foreclosure rose in every state except Hawaii.

“It appears that an increased number of vacant foreclosure properties may be an unintended consequence of the foreclosure moratoria put in place by Federal, State, and Local Governments,” Rick Sharga, executive vice president at RealtyTrac, said in a statement.

He explained that vacant properties can contribute to neighborhood blight and become safety hazards, especially during a pandemic. "The sooner these abandoned properties can be processed and sold to homebuyers or investors, the better it will be for communities and neighborhoods across the country,” he said.

The largest increases were observed in Kansas, Missouri, Georgia and Kentucky.

Overall, the vacated properties represent a very small proportion of residential properties, but the uptick was a potential “red flag,” according to experts.

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Department of Housing and Urban Development officials intend to extend a ban on foreclosures through the end of the year, according to a report from Politico. Those protections, however, would only apply to individuals with mortgages backed by the Federal Housing Administration.

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