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Zombie foreclosures terrorize ex-homeowners

Zombie foreclosures, the product of incomplete bank foreclosures, continue to stalk the often bankrupt former homeowners, who fight to pry their names off these undead properties.

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David Volker found that out the hard way. When the housing market crashed, so did Volker's contractor business, and he was unable to keep up with payments on his barn-like two-story house in Buffalo, New York. His mortgage servicer, HSBC, foreclosed on the home in 2009. A few months later, while he was staying with his girlfriend, he stopped by the house to find an HSBC padlock on the doorknob and bank stickers plastered across the door.

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Shattered glass covered his front steps. When he crawled through a broken window, he found the place trashed - by whom, he doesn't know. Even the toilets were gone. Hearing nothing more from the bank, he figured the house was no longer his.

The place continued to decay. Gutters tore loose from the eaves. The yard turned into a dump for balding tires. Volker's neighbors started complaining to the Buffalo Housing Court, which eventually tracked down Volker at the rental where the 49-year-old was living and ordered him to appear in court. That's when Judge Carney told him that he was still the owner.

"I was stunned," Volker says. "I never for a moment thought I still owned this house."

Volker worked with a realtor to try to get HSBC to take several short-sale offers - deals under which the bank would allow Volker to sell the house for less than the amount owed on it - but he says HSBC turned them down. Since then, he's been asking the bank to agree to a deed in lieu, whereby he would give the house back to the bank. So far, he hasn't been able to make that happen. He has $1,000 in water and trash bills and faces up to $30,000 in demolition fees if the city decides his house is a safety hazard and must be torn down.

HSBC declined to comment on Volker's case, citing privacy concerns. In a statement, the bank said it "has a strong commitment to home preservation and regards foreclosure as a last resort, only after alternatives have been exhausted and the borrower is seriously delinquent."

Cases against zombie-title holders are rising due to everything from sewer bills to tilting chimneys, and they are clogging the courts. In Milwaukee, Wisconsin, about 900 cases in the foreclosure process involve zombie titles. In South Bend, Indiana, the number is 1,275, up from 600 in 2006. In Memphis, Tennessee, cases have doubled in the past two years to 1,500.

In Cleveland, 15 percent of foreclosures between 2005 and 2009 stalled out in foreclosure limbo, more than a third of them involving homeowners who had fled foreclosure notices, according to the Case Western Reserve study.

STATE ACTION

State tax authorities are getting into the game, too. When IndyMac foreclosed on Richard Chavarry's house in Victorville, California, in 2008, he had already relocated to Los Angeles to escape the 80-mile commute to his job. The renters he had initially relied on to help him keep up payments on the Victorville house were long gone, too. But he had no idea that IndyMac canceled the sale in October 2009. "They never notified me," Chavarry said.

Nearly two years passed before Chavarry started getting citations in the mail for code violations from the city of Victorville. In February, the California Tax Board seized his $631 tax refund to pay the city back for the costs of scrubbing graffiti, removing tumbleweeds and boarding up the windows of Chavarry's house.

In March, Chavarry filed a deed in lieu to try to get IndyMac, now owned by OneWest Bank, to take back the house. The bank rejected it. Chavarry still owes the county $5,731 in back taxes and fees for housing-code violations.

IndyMac declined to comment.

Once a bank walks away from a foreclosure, the real rot begins. Living rooms turn into meth labs. Falling shingles menace passers-by. Squatters' cooking fires turn into infernos. The latest iteration of the trend: gas explosions.

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