AMIDST THE WALKING DEAD: JUDICIAL AND NONJUDICIAL APPROACHES FOR ERADICATING ZOMBIE MORTGAGES [Dagger]

INTRODUCTIONLike many homeowners in the United States, Joseph Keller fell behind on his mortgage payments and found himself subject to a foreclosure judgment.1 Once Keller received notice of the foreclosure sale, he and his family packed up their belongings and moved out, assuming that they would never "have anything to do with the house again."2 Unfortunately, Keller was wrong.About two months after Keller's receipt of the auction notice, "[his] bank filed to dismiss the foreclosure judgment and the order of sale."3 The result was a "zombie mortgage"-a property that remained in Keller's name as if the foreclosure proceedings had never started.4 Keller was also legally liable for back taxes, sewer fees, waste removal, and the overall maintenance of a decrepit property that he had not occupied in years and thought was no longer his own.5 Though abandoned foreclosures were once rare, the creation of zombie mortgages-like the one held by Keller-has been increasingly replicated in several cities across the nation, particularly in cities struggling economically after the downfall of the housing market.6Despite the fact that lenders have several options to avoid foreclosure, including home retention workouts or helping borrowers refinance their loans, many of them choose to begin foreclosure proceedings while they are still negotiating with borrowers.7 Throughout this process, lenders engage in an equity analysis "to decide whether to foreclose on a loan or conduct a charge-offin lieu of a foreclosure."8Whether it was a judicial or a nonjudicial foreclosure, lenders increasingly began to delay the foreclosure proceedings after either obtaining a judgment from the court for the sale of the property, after setting a date for the auction of the same, or even after the auction occurred.9 By ceasing all additional steps to complete the foreclosure proceeding, lenders attempted-and continue to attempt-to bypass legal liability for maintaining the property while retaining the ability to foreclose on the same mortgaged property in the future.10 More importantly, title to such property remained with the borrower given that the mortgaged property was never actually sold.11Though many scholars have proposed mediation, nuisance abatement, and criminal sanction strategies,12 these proposed solutions have not been sufficient on their own to eradicate zombie mortgages in the residential real estate arena.13 Therein, the solution to the zombie mortgage crisis lies in analyzing a lender's right to foreclose and subsequently using judicial and legislative approaches to transform that right into a legal obligation to finalize the foreclosure sale it voluntarily commenced.In Part I, this Comment presents a brief explanation of judicial and nonjudicial foreclosure proceedings. It also presents the definition of zombie mortgage, which will be used throughout this Comment. Part II then analyzes the rights of the lender, both when the borrower is in possession of the mortgaged property and when the property is unoccupied. Part II concludes by exploring the circumstances under which a lender's rights can become obligations.Next, Part III outlines the foundation that will underpin the solutions proposed in this Comment. Though a lender has a right to foreclose on the mortgaged property to satisfy the sum owed under a promissory note, purposeful delays in conducting such foreclosure sale could trigger judicial use of equitable discretion. Part III also discusses current legislative loopholes that permit lenders to delay the foreclosure sale indefinitely. This Part demonstrates that state judicial and legislative branches can interfere with a lender's right to foreclose if such lender's exercise of the right has been unduly delayed.Lastly, Part IV draws from the judicial and legislative intervention analysis discussed in Part III to recommend solutions for the zombie mortgage crisis. Though different solutions are presented for judicial and nonjudicial foreclosure states, the underlying goal of eradicating zombie mortgages can be accomplished in both types of jurisdictions. …