Update of 3/1/10: Federal Reserve apologizes for misinformation regarding its authority to regulate PTAF issues, but passes the buck on the complaint anyway. Story here.
Update of 2/8/10: See latest post wherein Fannie Mae blames its lawyers for its post-foreclosure letters. See new post here.
Update of 2/3/10: “Tenants Together”, a California tenant organization, operates a hotline for tenants in foreclosure situations, and today issued a press release that it is receiving a growing number of calls from tenants living in Fannie Mae properties who are being “harassed and misinformed by Fannie Mae-contracted [agents] in violation of the [PTFA].” See story here.
There have been previous postings regarding lenders who choose to ignore the clear requirements of the Protecting Tenants at Foreclosure Act which is no longer brand new — it became law May 20, 2009. See posts here, and here. After a foreclosure occurs, the new owner is supposed to honor a bona fide lease a tenant may have had with the prior owner (unless the new owner plans to occupy the property as his primary residence). If there is no lease, or the lease is expired, the new owner must still give tenants 90 days notice to vacate. See more on the law here. Many lenders have decided to confuse and scare tenants with deceptive and intimidating letters. What is astounding is that Fannie Mae, which is operated by the federal government, has chosen to completely violate the law.
In a notice to vacate dated January 13, 2010, lawyers for Fannie Mae state its position clearly:
If you are a Tenant in the property, please be advised that Fannie Mae also known as Federal National Mortgage Association has chosen not to continue your lease and therefore, you are no longer entitled to possession. … If you have paid your rent to your landlord prior to receiving notice of the foreclosure referred to above, you MUST VACATE THE PREMISES WITHIN THIRTY (30) DAYS from the date this notice is delivered.
Letter from Fannie Mae attorneys, dated January 13, 2010 (here).
This is not an isolated problem. I complained about Fannie Mae in September 2009 about this very problem (here). How can we expect for profit, for bail out, for big bonus banks to follow the law when Fannie Mae, a Government Sponsored Enterprise and one of the largest lenders in the world, flatly refuses to do so?
I am not confident that an administrative complaint with the appropriate federal agency will resolve anything. In response to a previous complaint I made regarding a deceptive letter sent on behalf of The Bank of New York Mellon, (here) the Federal Reserve Bank of New York suggested that I contact the lender’s attorneys (Barrett Daffin Frappier Turner & Engel, LLP) and suggest changes (I presume) and not complain about the all powerful lender, and concluded by stating:
The procedures entities must follow when foreclosing on real estate are matters of individual bank policy that are governed by principles of contract and state law. Therefore, the resolution of disputes about the acceptability of such procedures is not within the supervisory jurisdiction of the Reserve Bank.
Letter from Muriel R. Payne, Federal Reserve Bank of New York, January 19, 2010 (here).
First, I was not complaining about the foreclosure procedure. I was complaining that a purchaser of property at a foreclosure sale, a lender that is regulated by the Fed, was misleading tenants regarding their rights provided by federal law. Second, parties are responsible, not attorneys. I in fact had a face to face meeting with the lawyers for this lender (the same lawyers that sent the Fannie Mae letter above) and they explained that their clients approve these letters and they would have to get permission to change them. Third, it is disingenuous to suggest that the Fed does not have jurisdiction.
In fact the Fed issued a compliance letter on the subject giving guidance to their examiners:
Given the importance of the protections this law provides to tenants, examiners are instructed, as part of consumer compliance examinations, to evaluate an institution’s awareness of the law, its efforts to comply, and its responsiveness to addressing implementation deficiencies.
Federal Reserve CA 09-5, July 30, 2009, here.
The Fed has even issued specific examination procedures on what to look for and when to give corrective action:
2. Determine that the institution has incorporated its compliance responsibilities under the law into its operations, particularly with respect to its foreclosure notice procedures. …
7. Summarize findings and supervisory concerns. Identify actions needed to address any weaknesses and deficiencies in the institution’s compliance management systems. Discuss findings with institution management and obtain any necessary commitment for corrective action.
Fed, Protecting Tenants at Foreclosure, Examination Objectives and Procedures, at 3 here.
Some may complain about the for profit banks. They should. It is however disgusting that the federal authorities refuse to do anything to follow the law themselves, much less make anyone else do it.