Florida accounted for more than one-third of all zombie foreclosures (48,630) in the second quarter, according to an analysis by RealtyTrac. Other states in the top five included New York (12,666), New Jersey (12,170), Illinois (11,925) and Ohio (7,390).

"Zombie foreclosure" is now the common vernacular for properties that have started the foreclosure process but have never been foreclosed - and the homeowner has abandoned the property. Zombie foreclosures are a byproduct of lengthy foreclosure timelines and changing state foreclosure statutes. 

The properties tend to erode local government tax revenue and have been cited often by county and city officials nationwide as a key reason for rising tax delinquencies that often have prompted the hiring of third-party collection agencies.

Delinquent homeowners, who have left these properties, may not always understand they are still responsible for and owe property taxes on the foreclosure. RealtyTrac estimates that more than $400 million in property tax revenue nationwide is likely delinquent because of these zombie foreclosures.

States with zombie foreclosures that had been in foreclosure for the longest average time were New York (418 days), Florida (411 days), New Jersey (378 days), Illinois (272 days) and Hawaii (249 days).

"Most of these states have seen an increase in new foreclosure activity over the past year, creating a more fertile breeding ground for zombie foreclosures," said Daren Blomquist, vice president at RealtyTrac, an Irvine, Calif.-based real estate data firm. "For example, New Jersey foreclosure activity year-to-date is up 57% from a year ago, Maryland up 23%, Delaware up 16%, Maine up 12%, Wyoming up 27% and Iowa up 6%.

"These states are bucking the national trend, where foreclosure activity is down 23% year-to-date compared to a year ago. New York is about flat in terms of foreclosure activity year-to-date, but it's coming off a long string of increases that ended in March this year. Prior to March, foreclosure activity in New York had increased on a year-over-year basis for 23 consecutive months," Blomquist added.

Some states such as Florida and Illinois have passed foreclosure "fast track" legislation designed to help move these abandoned foreclosures through the system. New York is considering legislation to address vacant properties, including making lenders responsible for upkeep of zombie foreclosures before they complete the lengthy foreclosure process.

Local governments are working to leverage land banks to soak up the zombie foreclosures and either rehab them or demolish them. This is prominent in cities such as Cleveland and Detroit, but also Cook County, Ill. (Chicago) recently created a land bank.

Vacant foreclosures are declining nationally but still represent one in every five foreclosures
    •    141,406 zombie foreclosures nationwide in Q2 2014 (21% of total properties in foreclosure)
        -   One in every five foreclosures has been vacated by the homeowner before the foreclosure is completed
        -    Down 7% from 152,033 in Q1 2014
        -    Down 16% from 167,680 in Q2 2013

Zombie foreclosures actually declined in 38 states, led by California, where they were down 57%. Other states with big decreases in zombie foreclosures compared to a year ago included Arizona (down 51%), Nevada (down 50%), Washington (down 45%), Ohio (down 24%) and Oklahoma (down 22%).

"We are seeing fewer vacant foreclosures throughout the Ohio market. Many lending servicers appear to be taking advantage of the increased demand for listings, and working with delinquent homeowners to place their properties on the market while still occupying the property," said Michael Mahon, executive vice president/broker at HER Realtors, covering the Columbus, Cincinnati and Dayton, Ohio markets. "The winding down of the glut of foreclosure properties appears to be pointing to signs of continued housing recovery for the future."

Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty, covering the Oklahoma City and Tulsa, Okla., markets, added, "The REO inventory in the Oklahoma market is at its lowest level in seven years paralleling the downward trend in vacant foreclosure properties year over year. The banks are catching up with their zombie foreclosures and we are working our way back to normal."

?Financial institutions listed as the beneficiary on the foreclosure documents with the most zombie foreclosures included Wells Fargo (18,695), Bank of America (15,175), Chase (10,312) and U.S. Bancorp (10,141), according to RealtyTrac.

Laurie Maggiano, the Consumer Financial Protection Bureau's servicing and secondary markets program manager, said the CFPB is looking closely at abandoned properties and zombie foreclosures.

"There is direct borrower harm if a borrower believes a foreclosure on their property has been conducted and they are no longer responsible, and months or years later find out that they are, that there was never a foreclosure and they have large financial responsibilities that they never knew about," she said.

Some borrowers are harmed when a mortgage servicer starts a foreclosure but then fails to complete it, leaving borrowers on the hook for taxes and maintenance even though they may have already moved out.


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