A San Marcos man lost his home of nearly two decades after it was sold out from under him, all because of a small loan he took out years ago.
They've been nicknamed "zombie loans," loans you think were forgiven but that companies are just waiting to collect on.
Ramiro Gama bought his home in 2003, years after he moved to the U.S. from Mexico. He said he never imagined having his own home, but worked hard to achieve it.
A few years later, he put his home up as collateral for a $27,000 loan.
Get Southern California news, weather forecasts and entertainment stories to your inbox. Sign up for NBC LA newsletters.
"I just didn't think this could happen," said Gama. "The letter arrived and it said my house was going to be auctioned on May 9."
It was auctioned off because of that $27,000 loan. He says he thought he was in the clear because the company disappeared during the 2008 recession, so he stopped paying. Then in 2016, another company showed up trying to collect his debt.
"Years passed, then 2021 and I start receiving some letters," said Gama.
U.S. & World
News from around the country and around the globe
However he says he was suspicious of the company, so he stopped paying. Then he was told by a third company that they were foreclosing on his home.
His home sold at auction for around $300,000. The $27,000 loan was paid off, and Gama was given a check with the remainder. He still owes around $230,000 in his home mortgage.
"This is a common occurrence, unfortunately, recently termed zombie mortgages," said Octavio Cardona-Loya.
Cardona is a consumer attorney. He says a lot of these smaller loans seemed to vanish during the 2008 recession, but really just got passed to new companies.
"They got sold like a hot potato," said Cardona. "Sometimes you don't even know who you owe money to."
He also says the loans were sometimes purchased, but the new owners wouldn't foreclose or try to collect payments because the value of homes was so low. That meant any money from auctions would likely go to pay down the mortgages.
"If the second [loan] were to foreclose, the first loan's going to get everything," said Cardona.
Cardona says the companies who owned these smaller loans sometimes let people keep paying down their mortgage, and waited for home prices to rise. He says if you have an old loan you thought was forgiven, you should make sure.
"Sometimes the silence is the red flag," said Cardona.
If your home was ever listed as collateral, you should check to make sure any debts are settled. Sometimes title companies can run a report to see if there are any outstanding debts.
