Play Live Radio
Next Up:
0:00
0:00
Available On Air Stations
Economy & Business

Zombie Docket Keeps Foreclosures From The Financial Crisis Alive

DAVID GREENE, HOST:

The housing crisis might be over, but some people dealing with foreclosures from that time have been stuck in limbo. In some cases, the legal system still hasn't fully processed their foreclosures, even after eight or nine years. Sally Helm from our Planet Money podcast brings us the story of what it can take to tie up just one loose end from the financial crisis.

SALLY HELM, BYLINE: Deita Grant lives in a two-story house in Queens, N.Y. She bought it after seeing the big front yard. And around the time of the 2008 crash, things started to go wrong. Grant had medical bills to pay, and she fell behind on her mortgage. Eventually, she got a foreclosure notice in the mail. She was worried she was going to get kicked out any day. She hired a lawyer and then...

DEITA GRANT: So I'm waiting and waiting and waiting, still in default. I waited and waited and didn't hear anything.

HELM: Grant's case had gotten caught on something called the zombie docket. There were a ton of foreclosures happening around this time, so many that the banks couldn't keep up, but they had to file the cases within a certain time frame or they'd lose the right to foreclose. So they'd file the paperwork to start a foreclosure but then they wouldn't file anything else. So those cases couldn't move on to the next phase. Homeowners were left in this is zombie status with their cases sort of half dead and half alive.

I think some people might hear that and think that sounds like a good deal. There's nothing happening on the case...

GRANT: Because it gives you a nervous breakdown if you are somebody like me who worry about paying your way and how you're going to take care of it and then - oh, please. I've been through it.

HELM: In Queens, where Grant lives, there were thousands of people in this situation. Tracy Catapano-Fox was the clerk at the Queens Supreme Court, and she started to hear from homeowners like Grant who were getting sued and then hearing nothing from the bank. She pulled up the records, but the computer had no way to identify these zombie cases. So Catapano-Fox started counting by hand.

TRACY CATAPANO-FOX: It was me, a sheet of paper and a pen. And across there were all these tally marks, like old school going back to high school math.

HELM: A clerk alone in her office trying to clean up one tiny part of the wreckage left behind from the housing crisis. The court started bringing these banks and homeowners in to talk case by case.

CATAPANO-FOX: Foreclosures, unfortunately, are like snowflakes. Every one is different. Every one is unique. But some of the problems you see in them are consistent, and delays are always bad for the homeowner.

HELM: Catapano-Fox says that in some of these cases homeowners might have been able to negotiate a way to get out of debt. But now the late fees have piled up too high. For the bank's part, they'll always be able to get at least some of their money back if they eventually foreclose. Catapano-Fox says it's taking years to get these cases through the system. She's still seeing default cases from 2007, 2008 and 2009. Things did finally work out for Deita Grant. She got a loan modification in May. She should be done making monthly payments in 2037. But at 71, she says she's not sure she'll make it that far. Sally Helm, NPR News. Transcript provided by NPR, Copyright NPR.