The other victims of Foreclosure: Tenants. What to do If your Landlord faces Foreclosure

With the recent fallout from the Mortgage meltdown we have heard a lot about people loosing their homes thru the process of Foreclosure.Yet  there is one sector of the population who is also having to face the process of being evicted as a result of this process without any fault whatsoever, Tenants. There is a growing number of renters having to face loosing the home they are renting in many cases without fair warning.

Although the times and specific details of this situation vary a lot from case to case and from state to state the situation is becoming more and more prevalent and in many cases the end result is that people are forced to look for new accommodations.

In many cases tenants find out there is a problem either by being served eviction papers or by someone posting a foreclosure notice on their home. At this point some times landlords are hard to get a hold of and people are left in the dark.

 

In some cases, people facing financial hardship are moving out of their homes and renting them as a way of trying to stabilize their financial situation, however, in many cases this is not enough on the long run, that is only a temporary patch in a sinking boat, and as things continue to get harder they end up not being able to pay for their mortgage and end up in the process of foreclosure, yet in other cases, the property was an investment property owned by someone who is no longer able or willing to pay for it According to RealtyTrac, an Irvine, Calif.-based foreclosure-tracking service, 38% of all U.S. properties foreclosed between October 2007 and January 2008 were non-owner-occupied buildings (likely implying that the owner was an off-site landlord).

Once the foreclosure train gets into motion it is very hard to stop and the current laws in most states regarding renters are simply not updated to face this situation, so tenants are faced with very few options. Or as Judith Liben, a housing attorney with the Massachusetts Law Reform Institute expressed it “The laws for renters right now are completely antiquated regarding foreclosures.”

The worse cases have been when tenants don’t have contracts or when it is a rent with an option to buy situation. In those cases tenants have lost much more than just their accommodations, they have lost money and they have lost their dream of homeownership being just around the corner. Another situation where we see a major problem is when tenants are given very short notice to vacate and they don’t have the extra cash needed to move out and put a deposit on a different property.

The deposit is usually one of the issues that will take the longest to get resolved and getting it back more often than not requires some court proceedings and some time.

If you find yourself in the situation of renting a house under this conditions, what is the best thing to do? Like with any legal issue if you can afford legal counsel, get some, the law varies a lot depending each particular situation there are so many details involved that will change the situation that it is hard to find a one size fits all advice, however, there are some general concepts that might be of some help

• If you start noticing that your landlord is not responding to your calls and is not keeping up the property as well as he should, check to make sure the property is not in default and keep records, meticulous records of all those calls and work not performed.
• If the landlord is the one responsible for paying the utilities, call the service companies and make sure all payments are up to date.
• Don’t just stop paying the rent but if the owner is not collecting rent, open an account and start depositing the rent in a timely manner, that way if the bank comes to you later and asks for the unpaid rent you will have it available.
• If you receive notice to vacate, contact your attorney or your Tennant Association, you might not have to move, you will have some rights, even with a month to month contract you might be entitled to some advanced notice. Also many banks want the tenants to vacate in as good terms as possible to have the homes left as soon and in the best condition they can manage so they will offer you money to leave and return a clean house, this is termed “cash for keys” just make sure you read the fine print before you accept the cash, you might be waiving some of your rights to come after damages later on.
• In some cases you might be able to stay for the entire term of your lease agreement, this varies from state to state and if this is the case, the agreement transfers as originally signed so if pets were originally allowed, they must be allowed to remain for example.
• When paying rent ALWAYS ask for a rent receipt and keep the receipts well-organized.

 

As a final thought, in today’s market conditions, landlords have become very strict about checking out credit reports for potential tenants, some going as far as to request that interested parties disclosed financial data and show income of at least twice the amount of rent. Why is it that renters are not doing the same with landlords? It is no longer enough to check that the property is not currently in default, but to have some peace of mind although this is not a guarantee, that your next landlord can actually afford to maintain the property.

On The Way To Foreclosure? What Are You Doing About It?

It used to be that Short Sales and Foreclosures where terms only few people knew, mostly people inside the industry, and even then very few knew what it entitled and how the process worked. Thing change, and this two terms have come to be part of every day conversation for people like you and me and everyone else.

The shift occurred when the number of people having to go thru this process became so high. So now, it could be you or anyone we know going thru one of this situations.

Because of the high number of people in this situation, programs had to be put in place to help homeowners trying to save their homes from Foreclosure, so in a sense if it was to happen to you at any given moment, this is the time when you will find more help, you can use the phrase “there is safety in numbers”  Also socially, there used to be a big stigma associated with going thru this process, there was a sense of shame, today there is mostly a sense of being a victim of the current times.

But knowing that there is help out there is not comforting at all if you do not know what that help is or how to find it. Here are some suggestions on what to do if you find yourself in such a position.

• First things first.- Take the situation seriously and confront it, take charge. The worst mistake that many people make is to be in denial until the very last-minute when there are no more options. so first;  Try to contact your servicers, it won’t be an easy task, it will take a lot of holding on the phone, so be patient and plan on being on the phone for a while.  Ask for the “Home retention team” and alway take notes of everything that you say and the names and dates of who you spoke to and when.
• Get informed on what help is out there.-  One of the first tools available is the ” Making Home Affordable Mortgage Modification Program” it  is the government’s main program to prevent foreclosures. More than 2,300 servicing companies participate, covering about 85% of all single-family home loans, according to the Treasury Department’s Laurie Maggiano. Your servicers will have other options that might range from making a new loan to changing the terms on your current one. Also check the web sites out there that will give you all the information you need. Here a few sites to use:

http://www.hud.gov/hopeforhomeowners/

http://makinghomeaffordable.gov/

http://www.hopenow.com/

http://www.homeloanlearningcenter.com/YourFinances/ForeclosurePreventionResourceCenter.htm

• Stay on top of it.- You will have to manage the whole process, there will be a lot of papers and forms you will have to fill out, keep records of every conversation and every form and paper you turn in, make copies of everything, you should have a complete file with you. It will require a lot of following up on your part, you can not assume that they will call you if something is missing, you have to call them and make sure they received everything you sent and that they have everything they need. Send things in the order they ask for them, make sure each page is clearly identified as belonging to your file, the easier you make it on them the greater the chances of getting a faster response. This does not guarantee that you will have the outcome that you would like, but in case you don’t you can re-apply and you will already have much of the work done and organized.

 

• Do I have any other options?.- The answer is YES, however, it is important that you first try to contact your loan servicers before considering any other options. If you are not succesful at that you can always look for options such as  turning in the house and walking away, selling it as a Short Sale, etc.

I have to warn you, there are many scams out there right now, if you feel you need someone to help you thru the process there are genuine options out there but please make sure you are in good hands and not just fallen into a scam.

If you have any coments or questions let me know.

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