Warren Seeks Records on Whether Big Banks Secretly Sold Americans' Mortgages to 'Zombie' Debt Collectors, Leading to Foreclosures

Warren Seeks Records on Whether Big Banks Secretly Sold Americans' Mortgages to "Zombie" Debt Collectors, Leading to Foreclosures

"Now, Americans who thought they were doing everything right learned, in many cases many years later, that debt collectors seeking to exploit the increase in their home valuations were going to foreclose on their homes."

Text of Letter (PDF)

Washington, D.C. - U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, sent a letter to the independent, nationwide monitor of the 2012 National Mortgage Settlement, requesting records of mortgages that were extinguished under the settlement. The letter follows recent reportingrevealing that debt collectors are attempting to foreclose on thousands of Americans based on second "zombie" mortgages that many of these homeowners received documents indicating were cancelled.

"The five largest servicers, Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc., reached a $25 billion settlement with forty-nine of the state attorneys general and the federal government, known as the National Mortgage Settlement," wrote Ranking Member Warren. "Servicers forgave over $15 billion of second mortgages. Servicers earned a set amount of 'credit' for these extinguishments towards their settlement obligations, and homeowners were supposed to be able to move forward with their lives without these second mortgages hanging over their heads."

The Ranking Member raised concerns that debt collectors may be using these supposedly extinguished second mortgages to foreclose on Americans' homes: "There have been numerous cases of homeowners who had stopped receiving statements on their second mortgage, received tax documents saying their second mortgage was cancelled, or had the loans removed from their credit reports, and then learned that the second mortgage was still active. Companies purchased millions of dollars of these second mortgages-and waited to collect until home prices rose. Now, Americans who thought they were doing everything right learned, in many cases many years later, that debt collectors seeking to exploit the increase in their home valuations were going to foreclose on their homes."

She continued: "Given how many second mortgages were extinguished as part of the National Mortgage Settlement, I am concerned that banks may have received credit for extinguishing second mortgages in the settlement, when in fact they sold those loans to debt collectors."

She concluded by requesting records related to the extinguishment of second mortgages under the terms of the National Mortgage Settlement and other relevant settlements, no later than January 7, 2026

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