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Blog » The Walking Debt

The Walking Debt

Maybe you’ve heard of zombie debt. But aside from the catchy name, do you really know what it is? For an in-depth description, check out this article from Forbes. For the Cliff’s Notes enthusiasts, it’s basically debt so old that it’s often past the legal statute of limitations for collections, but that doesn’t stop debt collectors from trying to scare consumers into paying for it.

Often times, the record keeping behind zombie debt is non-existent, plus the debt collector is generally a third-party (not the original business you may have owed), so it’s difficult to ascertain if you ever actually owed the debt. As the financial crisis continues to strain families across the country, experts anticipate that more zombie debt will awake over the next few years.

A different kind of walking debt is described in a recent article from The Huffington Post. Although different in its origins, it’s likely led to more nightmares for consumers, as the stakes are much higher than the price of an old Macy’s bill. This is debt homeowners owe on a mortgage, and it walks between different entities as part of the financial industry’s push to securitize mortgages.

So you may take out a loan with your local bank, but it’s quickly sliced and diced and sold to a different financial institution or investment group. This leads to some obvious problems; namely, who do homeowners turn to when they need to discuss or modify the terms of their mortgage, as so many have been forced to do during the housing crisis?

The answer is, homeowners are pawned off to mortgage servicers who collect payments (and hefty fees), but are often not invested beyond that, so they drop the ball on mortgage modifications or refinances, forcing homeowners to jump through circus hoops trying to get a straight answer.

There are some signs that the situation may be on the path to improving for homeowners, with the creation of the Consumer Financial Protection Bureau and many states (including Oregon) taking action on foreclosure reform policy. But the problem of zombie and walking mortgage debts will not go away until financial industry leaders undertake major systemic changes, and their delay in acting has already led to countless Americans living through the nightmare of unresponsive lenders taking homes that could have been saved.