What if Your Landlord Faces Foreclosure?
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Saturday, January 3, 2009
You're paying your bills, but your landlord isn't. And you're the one holding the eviction notice.
This is becoming an all-too-familiar scenario for thousands of renters nationwide who have become the unintended victims of foreclosures. Banks are booting good tenants onto the streets with little to no notice after seizing a property from a delinquent owner, ignoring tenant leases.
In the most troubling cases, some families are forced into shelters for temporary housing because they have little savings to cover moving costs, first month's rent and a security deposit at another apartment. Laws in some areas, including the District, protect tenants, but renters in most areas don't have any recourse.
Fannie Mae recently pledged to change that with its new renter policy, which begins this month. The plan will allow renters living in foreclosed properties to sign new leases with Fannie Mae while the property is up for sale, or give tenants money to relocate. Fannie Mae has yet to establish the length of the leases, and the amount of move-out assistance will vary by state and property.
Freddie Mac said it will unveil a similar program soon.
But how does a renter know if his landlord has a Fannie Mae- or Freddie Mac-held mortgage? Worse yet, what about renters whose landlords don't?
Fannie Mae plans to reach out to tenants, company spokesman Brian Faith said.
"Most tenants don't normally know the details of their landlord's mortgage arrangements, but we'll be contacting the tenants in foreclosed properties we own to make them aware of the option to stay in their home through a lease with Fannie Mae," he said.
The details of Freddie Mac's plan aren't available yet.
The two mortgage giants own or guarantee about half of the $11.5 trillion in U.S. outstanding home loan debt. Fannie Mae said about 4,000 tenants live in the company's foreclosed properties and would be eligible for the plan.
Unfortunately, that's just a fraction of renters facing the consequences of a landlord's foreclosure. Renters in large complexes are likely safe because multifamily loan delinquencies are still very low. But 15 million tenants, or about 40 percent of all renters, live in single-family houses, many of which are owned by mom-and-pop investor landlords. This is where the risk lies.
What should you do if you receive a foreclosure or eviction notice?
