Foreclosure Buzz

Update: 2/26/10: Fannie Mae continues to violate PTFA here, blames its lawyers here, fails to certify compliance here.

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It is no surprise that private lenders and their lawyers are attempting to push tenants out of a property after they foreclose so they will not have to comply with the federal act called the Protecting Tenants at Foreclosure Act (PTFA) passed in May 2009 (article here), however, it is a little surprising that the bailed out Fannie Mae and Freddie Mac, the GSEs (government sponsored, and currently run, enterprises) that are two of the largest lenders in the country, are misleading tenants too.  But they are not unlike most every other task force or other state effort out there we checked on.

Fannie Mae is not merely silent; their site misinforms:

A renter who wants to stay in a home that has been foreclosed can now sign a month-to-month lease if the property is owned by Fannie Mae.

Fannie Mae website “Support for Renters” here.

Of  course the new law that has been in place almost four months requires Fannie Mae to honor the lease in place, or give the tenants at least 90 days notice if the lease expired.  Mandating that tenants sign new month-to-month leases for a new rent amount totally violates the law (and Fannie Mae only allows this in certain circumstances they say).

I was at a foreclosure task force meeting yesterday and one of the spokepersons for Freddie Mac mentioned their new renter program for both homeowners and tenants.  I was curious about a “program” for tenants given the new law.  Sure enough, same kinda thing on their site:

Is my previous lease still valid?

No. Freddie Mac will enter into a new lease with all occupants. If your prior lease was a Section 8 lease, you will continue to pay the same monthly rent that you paid under your Section 8 lease.

“2009 Freddie Mac Rental Initiative FAQs” here.

Fannie estimates that 20 percent of all properties facing foreclosure are occupied by renters.  I wonder have many of these are misled by the GSEs?  I wonder how many just leave, take the loss, and suffer hardship to avoid dealing with a GSE, living on a month-to-month lease?  I wonder how many fear they will not qualify for these “programs” and think they will just be evicted?

What about all these other foreclosure task forces scattered throughout the country?  No better.

Ohio and Nevada have similar bad information as the GSEs on their sites.  But four months is just not enough time to make such a change obviously.  If the GSEs cannot get it right just yet, why should a state task force?

Another method out there is just to keep it a secret like the task forces in Texas, Washington, Georgia, Pennsylvania, Colorado, Hawaii, and Wisconsin.  After all, this issue has nothing to do with preventing foreclosures and that is all these states care about.  Who cares about tenants who may not have moving expenses, or security deposits saved?  Who cares that they may have to move to a new school district in the middle of a year, or find a different bus line to get to work, etc.?  I mean really, who cares about these families?

Michigan does not mention the new law on their foreclosure site, and their tenant site is wrong too here.  Florida’s various sites miss it as well: Lee County, Collier County, Office of Financial Regulation, and the Florida Housing Finance Corporation.

Virginia is good here, but they reference Fannie Mae’s site with the misinformation, and then on the same page as the new law they say:

• If you have to move before your lease expires, you may be able to sue your landlord for monetary damages. However, this can be costly, time consuming, and it may be difficult to collect money from a landlord who is in foreclosure.
• If the bank or new owners contact you directly, negotiate with them for a move out date that suits both of your needs.
• The new owner may also offer you “cash for keys” if you leave the property voluntarily without going to court.
• Do not pay rent to the new owner unless you have reached a written agreement concerning your right to remain in the property.

Virginia Foreclosure Prevention Task Force “Renter’s Rights” here.  (The advice not to pay rent is especially helpful.)

Same with Arizona.  They are good  in mentioning the new law here, but on same page and another page on their site it says tenants are out (“If a landlord rents out a home or other property and is facing foreclosure, the tenant may not be allowed to stay on the property. Also neither the landlord nor the bank is legally obligated to let the tenant know about the foreclosure. Most of the time, the renter is told about the foreclosure when the party is being told to leave the property.”) Arizona Foreclosure Prevention Task Force “Renters Information” here.  These two states knew about the change in the law, felt it important enough to mention, but not really enough to make sure things were done right.

California’s (here) is the only one I can find that did it right (but I have not checked every state, nor every site in every state).  The best source of information about the new law I have found is the Renters in Foreclosure Toolkit on the website of the National Low Income Housing Coalition.

Maybe somebody could suggest a change.  I did that for NeighborWorks.  The renter area of their site used to be confused on the issue at best (previous version of their site here).  After several emails and help from an insider, instead of fixing it, NeighborWorks simply removed any reference to it from the renter area of their site (here) which might be where a renter would go for information.  But after I searched awhile I found it in the “Foreclosure Solutions” part of their site here.  See, taking the diplomatic approach worked wonders.  It makes little sense to polarize folks since we are all in this together helping families.

Just because these websites are wrong and have been for months getting collectively thousands of hits a day is no big deal.  I am sure all the lenders, including the GSEs, will look out for these families and have their law firms send them notices to vacate that make their rights to continue to rent are crystal clear (it is working really well so far, article).

As these links above hopefully go bad or are changed I will try to take note and update the post.

Filed under: Advice for Borrowers, National Foreclosure News