CBS News
Could a zombie mortgage put you at risk of foreclosure? Long-forgotten debt is coming back to haunt homeowners.
Jose Arzate once dreamed of a peaceful retirement in a quiet neighborhood in his hometown. A 24-year veteran of the county probation office, Arzate thought he had achieved the American Dream when he purchased a three-bedroom ranch house in Santa Maria, California, 20 years ago.
“As an immigrant, you have a dream, a dream of owning your own home. It’s your castle. It’s for your family,” said Arzate.
The son of Mexican immigrants, Arzate envisioned the family home would be passed on for generations. But while he thought he was building a future for his family through equity in his home, a hidden financial nightmare was eating away at his dream.
“I woke up one morning to find sheriffs outside my door,” Arzate said. “I had no idea this was coming. I was in bed, starting my day, and suddenly, I was being evicted.”
What Arzate was dealing with was a zombie mortgage.
Arzate had modified his loan 13 years earlier, taking out a second mortgage to manage expenses. He assumed his monthly payments covered both mortgages. Unknown to him, he says, the second mortgage had been sold to a different servicer. Arzate said he never got a separate monthly statement for that second mortgage until it was too late.
“I didn’t get a bill at all,” he said.
More than a decade later, that unpaid loan was resurrected with interest and late fees, inflating the debt from $65,526 to $139,211.
Federal law mandates lenders send statements for home loans, but some don’t comply. Arzate said he was told he needed to pay the lump sum or leave.
“If you owe money on a credit card, they send you a bill every month,” Arzate said. “They didn’t do that. They just evicted me.”
The rise of zombie debt
Zombie debt refers to long-forgotten or old debts that resurface, often with accumulated interest and fees, threatening the financial stability of unsuspecting homeowners. These debts are frequently sold to new servicers who then aggressively pursue the outstanding amounts, sometimes leading to foreclosures.
“It’s the mortgage you thought that was dead that has come back from the grave to come and haunt you,” said Rich Szerman, a Realtor in California.
Szerman said he’s seen similar cases among his clients.
“Most people get them because they filed a bankruptcy and they thought that discharged a junior lien, a second [mortgage], or they did a modification and they thought it was included. Or they sometimes get letters from their bank saying that your debt is discharged and is no longer collectible and no further payments are necessary,” he said. “[And yet] the debt still exists even under those circumstances.”
A ticking time bomb
After years of combat, Iraq War veteran Laverne Simmons found solace in her modest Inglewood, California, home. Yet, after more than a decade of timely mortgage payments, she was blindsided by a default notice.
“I haven’t been late or asked for a payment arrangement or anything. So I was really confused,” said Simmons.
While working to get her disability benefits situated with the Army, the medical bills for her wartime injuries piled up. Simmons took out a second mortgage in 2014 to help make ends meet.
Just like Arzate, she believed her monthly payment covered both mortgages. She said she never received statements for the second loan. Though some aspects of their claims, like the lack of billing, were impossible for CBS News to verify, they fit the pattern experts described.
Over time, with interest and fees, her $65,000 loan ballooned to over $140,000. Faced with foreclosure, she sought help from Rich Szerman.
“These debts get sold to vulture capitalists who enforce the full loan value with back interest and penalties,” Szerman said. “If you don’t pay, they take your house. It’s unethical, immoral, and wrong.”
Szerman is also working with Los Angeles single mother Teresa (who asked that her last name not be used).
“Back in 2009, I had to modify my [mortgage] loan,” she said. “I was going through a divorce. I had 2-year-old twins.”
Teresa says she never received a monthly statement for her new second mortgage, and assumed it rolled into her primary loan payment.
In January, she discovered she’d been mistaken, and learned her loan had been sold to a new servicer.
“I received a letter from Statebridge Company notifying me that I owed them over $180,000, with an initial payment due of over $50,000, and that I was behind by over 5,000 payments,” she said. “I looked at this, and I, I mean, I didn’t recognize it. I didn’t know what it was from.”
Teresa says Statebridge, a debt collector, has refused to negotiate her balance.
“It’s beyond scary,” she said. “To know that there might be a moment where we may have to move. And given the real estate prices and the rental prices in Southern California, I’m not looking at relocating to the house next door or to an apartment next door. I’m looking at — I can’t afford to live in California anymore if I can’t stay in my current home.”
A spokesperson for Statebridge declined to comment on Teresa’s case.
The legal and ethical battleground
Rohit Chopra of the federal Consumer Financial Protection Bureau said his agency has seen an increase in complaints about zombie mortgages, with some debt collectors skipping steps in the foreclosure process.
“Many times, we’re hearing they’re targeting older homeowners, people who may be sitting on a lot of home equity,” Chopra said. ”A lot of this is totally under the radar, and much of these practices are illegal.”
Chopra said they don’t have data on how widespread the problem is, but he encourages homeowners facing zombie debt collection to immediately report it to the CFPB.
“This is a big failure from the lead-up to the financial crisis where regulators in Washington weren’t watching what was happening on the ground in local communities,” he said. “We have been reaching out across the country to ask, where is this happening and what can we do about it?”
Intercontinental Exchange Inc., or ICE, has been tracking performance on home equity loans since mid-2008, based on a subset of the market. The data reflects the impact of the financial crisis, showing high delinquency and liquidation rates around 2006 through 2008.
The ICE database tracks two key metrics: the percentage of loans ever 120 days past due and the percentage of loans involuntarily liquidated. The liquidations, reported by servicing companies, include events like foreclosures, the lender writing off the debt as a loss, or the lender selling the property for less than what’s owed.
Simmons said she believes the debt holder on her second mortgage, Real Time Resolutions, waited until economic development in her neighborhood began increasing property values to send her notice.
“They just laid dormant until there was a time that I had enough equity, and then things started building over here, like the SoFi [Stadium], the Clippers [arena], and then that’s when,” she believes, “they were ready to strike, like a snake, just waiting for the right moment.”
Real Time Resolutions recently settled a class action lawsuit with a different homeowner who claimed she’d been foreclosed upon without ever receiving the required monthly statements. The company denied wrongdoing but told CBS News they weren’t “interested” in commenting.
Protecting yourself
Zombie debt isn’t confined to mortgages. It can encompass medical bills, student loans, and even auto loans, lying dormant until a new servicer revives them.
To avoid falling victim to zombie debt, CFPB urges consumers to regularly check their credit reports for any liens or unfamiliar debts. If a suspicious bill appears, it’s crucial not to pay it immediately. Instead, contact an attorney or local legal aid group to navigate the complexities of these claims.
“Don’t pay a bill that is for something you don’t owe,” said Chopra. “File a complaint with the CFPB and talk to someone you trust who can help you navigate this process.”
Fighting back
Both Arzate and Simmons are determined to fight back.
“I served my country, got injured, and now I have to go through this,” Simmons said. “It’s been pure hell. But I’m determined to fight for my home.”
While Arzate’s home was auctioned, he is suing to reclaim it while still making monthly mortgage payments. Meanwhile, he lives with his adult son in a crowded home, his wife staying with family to save money.
“Twenty years of memories are gone, but we’re going to get it back,” Arzate said.
Bela Karolyi, the charismatic if polarizing gymnastics coach who turned young women into champions and the United States into an international power, has died. He was 82.
A spokesperson for USA Gymnastics confirmed to CBS News by email that Karolyi died Friday. No cause of death was given.
Karolyi and wife Martha trained multiple Olympic gold medalists and world champions in the U.S. and Romania, including Nadia Comaneci and Mary Lou Retton.
Ron Jenkins/Fort Worth Star-Telegram/Tribune News Service via Getty Images
“A big impact and influence on my life,” Comaneci, who was just 14 when Karolyi coached her to gold for Romania at the 1976 Montreal Olympics, posted on Instagram.
The Karolyis defected to the United States in 1981 and over the next 30-plus years became a guiding force in American gymnastics, though not without controversy. Bela helped guide Retton — all of 16 — to the Olympic all-around title at the 1984 Games in Los Angeles and memorably helped an injured Kerri Strug off the floor at the 1996 Games in Atlanta after Strug’s vault secured the team gold for the Americans.
Karolyi briefly became the national team coordinator for USA Gymnastics women’s elite program in 1999 and incorporated a semi-centralized system that eventually turned the Americans into the sport’s gold standard. It did not come without a cost. He was pushed out after the 2000 Olympics after several athletes spoke out about his tactics.
It would not be the last time Karolyi was accused of grandstanding and pushing his athletes too far physically and mentally.
During the height of the Larry Nassar scandal in the late 2010s — when the disgraced former USA Gymnastics team doctor was effectively given a life sentence after pleading guilty to sexually assaulting gymnasts and other athletes with his hands under the guise of medical treatment — over a dozen former gymnasts came forward saying the Karolyis were part of a system that created an oppressive culture that allowed Nassar’s behavior to run unchecked for years.
Still, some of Karolyi’s most famous students were always among his staunchest defenders. When Strug got married, she and Karolyi took a photo recreating their famous scene from the 1996 Olympics, when he carried her onto the medals podium after she vaulted on a badly sprained ankle.
Despite losing his boxing match to Jake Paul, Mike Tyson in a social media post Saturday said he had “no regrets” to getting “in ring one last time.”
The boxing legend was defeated by social media star Jake Paul in a highly anticipated fight on Friday night with an age difference of over three decades between the two contenders.
Netflix said Saturday that 60 million households worldwide tuned in to watch the match. The two fighters went eight full rounds, with each round two minutes long. Paul defeated Tyson by unanimous decision and the 27-year-old upset boxer and 58-year-old former heavyweight champion hugged afterward.
Paul was expected to earn about $40 million from the fight, and Tyson was expected to take around $20 million for the fight, according to DraftKings and other online reports.
Getty Images
Tyson said on his social media that “this is one of those situations when you lost but still won. I’m grateful for last night.”
The fight almost didn’t happen after Tyson experienced an ulcer flare-up while on a plane in March. He addressed his illness Saturday, writing that he “almost died in June.” He said he had eight blood transfusions and “lost half my blood and 25lbs in hospital and had to fight to get healthy to fight so I won.”
Tyson retired from boxing in 2005 after a 20-year career. He last fought in a 2020 exhibition match against former four-division world champ Roy Jones Jr.
“To have my children see me stand toe to toe and finish 8 rounds with a talented fighter half my age in front of a packed Dallas Cowboy stadium is an experience that no man has the right to ask for. Thank you,” he said.
Alex Sundby and
contributed to this report.
In their final meeting, China’s leader Xi Jinping told U.S. President Biden that his nation was “ready to work with a new administration,” as President-elect Donald Trump prepares to take over.
The two leaders gathered Saturday on the sidelines of the annual Asia-Pacific Economic Cooperation summit. Mr. Biden was expected to urge Xi to dissuade North Korea from further deepening its support for Russia’s war on Ukraine. It marked their first in-person meeting since they met in Northern California last November.
Without mentioning Trump’s name, Xi appeared to signal his concern that the incoming president’s protectionist rhetoric on the campaign trail could send the U.S.-China relationship into another valley.
“China is ready to work with a new U.S. administration to maintain communication, expand cooperation and manage differences so as to strive for a steady transition of the China-U.S. relationship for the benefit of the two peoples,” Xi said through an interpreter.
LEAH MILLIS/POOL/AFP via Getty Images
Mr. Biden, meanwhile, spoke in broader brushstrokes about where the relationship has gone and reflected not just on the past four years, but on their long relationship.
“Over the past four years, China-U.S. relations have experienced ups and downs, but with the two of us at the helm, we have also engaged in fruitful dialogues and cooperation, and generally achieved stability,” he said.
Mr. Biden and Xi, with top aides surrounding them, gathered around a long rectangle of tables in an expansive conference room at Lima’s Defines Hotel and Conference Center.
There’s much uncertainty about what lies ahead in the U.S.-China relationship under Trump, who campaigned promising to levy 60% tariffs on Chinese imports.
Bobby Djavaheri, president of Los Angeles-based Yedi Houseware Appliances — which manufactures its products in China — told CBS News in an interview this week that such tariffs “would decimate our business, but not only our business. It would decimate all small businesses that rely on importing.”
Trump has also proposed revoking China’s Most Favored Nation trade status, phasing out all imports of essential goods from China and banning China from buying U.S. farmland.
Already, many American companies, including Nike and eyewear retailer Warby Parker, have been diversifying their sourcing away from China. Shoe brand Steve Madden says it plans to cut imports from China by as much as 45% next year.
White House national security adviser Jake Sullivan said Biden administration officials will advise the Trump team that managing the intense competition with Beijing will likely be the most significant foreign policy challenge they will face.
It’s a big moment for Mr. Biden as he wraps up more than 50 years in politics. He saw his relationship with Xi as among the most consequential on the international stage and put much effort into cultivating that relationship.
Mr. Biden and Xi first got to know each other on travels across the U.S. and China when both were vice presidents, interactions that both have said left a lasting impression.
“For over a decade, you and I have spent many hours together, both here and in China and in between. And I think we’ve spent a long time dealing with these issues,” Mr. Biden said Saturday.
But the last four years have presented a steady stream of difficult moments.
The FBI this week offered new details of a federal investigation into Chinese government efforts to hack into U.S. telecommunications networks. The initial findings have revealed a “broad and significant” cyberespionage campaign aimed at stealing information from Americans who work in government and politics.
U.S. intelligence officials also have assessed China has surged sales to Russia of machine tools, microelectronics and other technology that Moscow is using to produce missiles, tanks, aircraft and other weaponry for use in its war against Ukraine.
And tensions flared last year after Mr. Biden ordered the shooting down of a Chinese spy balloon that traversed the United States.
