Vol 8 No. 13 - December 19, 2007

Renters can be casualties of foreclosure war

By Louise Bolger
sun staff writer

Christmas is less than a week away, but there are thousands of families that may be getting a visit from the Grinch rather than Santa. The deflating housing bubble is not only wrecking a lot of homeowners’Christmases, it’s also creating a housing Grinch for renters.

All across the country there are renters that are losing their homes, not because they didn’t meet their monthly obligations, but because their landlords didn’t meet theirs.

Through no fault of their own, these renters are the casualties of the foreclosure war we’re fighting. Unaware that the property was going into foreclosure, a renter promptly paid his monthly rent to the owner. Frequently, the first indication he has is when he receives a letter or knock on the door from a representative of the owner’s mortgage lender, who has now taken over the property.

Typically lenders evict tenants, even those with valid leases, in order sell the property. This is especially true if the property has not been maintained by the owner and requires repairs before getting it on the market.

Unfortunately, many renters do not have the means to quickly find a new house or apartment to rent, which generally requires them to remit first and last month’s rent up front.

I handled hundreds of foreclosed properties for lenders in the early 1990s in New York, and it was not uncommon for the lender to offer some compensation to the tenant in order to encourage him to voluntarily vacate before an eviction. Last month the House of Representatives proposed a bill as part of a larger mortgage act that included protections for renters. The lending industry naturally opposes this bill, which would allow tenants up to six months after forecloseure to remain in the property.

The mortgage crisis is still unfolding, but the Mortgage Bankers Association found that one in eight foreclosures were non-owner occupied. This is probably an underestimated number, since not all owners disclose that their properties are rentals.

In addition, the run up of the real estate market included many small investors who have not been able to keep up with their mortgage payments and have let their rental properties go into foreclosure, usually without advising their tenants.

Renters may not have a lot of rights if they’re caught up in a foreclosure process, but they can keep their eyes and ears open for potential signs. Maintaining an open line of communication with the landlord could give you some insight into his financial position. Not responding to requested repairs or terminating weekly and monthly landscapers could indicate a problem, as well as phone calls to your number for the landlord.

If you as a renter have a suspicion that the property you’re leasing may be going into foreclosure, you can check online for lis pendens actions and actual foreclosure sales. Manatee County’s Web site can be searched by property address for any lawsuits and liens filed against an individual or property.

Every economic shift affects people who don’t necessarily deserve it, and renters are the collateral damage of the fiscal crisis we’re currently living through. Don’t let the Grinch steal your Christmas. Stay alert to a potential problem. Happy holidays to all.

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