Scott Amable remembers the day his world turned upside down. A man in jeans and a plaid shirt appeared at their doorstep, informing them that they were no longer homeowners. The couple had lost their three-bedroom rambler to foreclosure in 2021 due to an unexpected $200,000 debt on a second mortgage.
What wasn’t normal about this situation was the fact that the original lender had sent them each a tax document more than a decade earlier stating that their debt had been canceled. Yet, the company that foreclosed on them, ARC, knew all about those documents and bought the loan from their original lender for just $2,131.
ARC is one of several debt collectors specializing in buying “zombie” mortgages – loans that were taken out before the Great Recession but became worthless to lenders after housing prices crashed. These companies often make massive profits by collecting back interest on these dormant loans, which can be as high as 3,321% of the original amount.
The company’s business model relies on buying old second mortgages from banks and other financial institutions, then hiring law firms and vendors to demand unexpectedly high balances or risk losing their homes. While they brand themselves as investors, their main business is debt collection.
Internal records show that ARC routinely sought and collected tens of thousands of dollars in back interest, leading to huge returns on loans bought at fire-sale prices. However, this comes at a cost – many borrowers are left feeling coerced and confused, with some even facing foreclosure despite having no idea about the debts they owe.
The Amables’ story is not an isolated incident. Thousands of miles away, in Miami Beach, Florida, ARC foreclosed on another couple, leaving them to deal with the aftermath. The company’s practices have raised serious concerns among consumer advocates and regulators, who are working to address predatory lending practices that affect millions of Americans.
In recent years, four states have passed legislation aimed at addressing zombie second mortgages. However, these laws provide little relief to people who’ve already paid or lost their homes. The federal government was poised to intervene this year but President Donald Trump’s administration hobbled the initiative.
As the Amables reflect on their ordeal, they are heartbroken and angry. Scott said he feels like “these are just thieves with white collars,” while Kari still can’t drive past their old house without feeling a sense of loss. The couple is now living in an RV park, struggling to make ends meet after dipping into her retirement savings to buy a trailer.
Their story highlights the need for stronger consumer protection laws and more transparency in the debt collection industry. As ARC’s profits soar, many are left with nothing but debt and heartache.
Source: https://www.bloomberg.com/graphics/2025-zombie-debt-collectors-mortgage-loans