Renters losing their homes without missing a payment

by Adam Doster

http://rawstory.com/news/2007/Renters_losing_their_homes_without_missing_1117.html

While the housing foreclosure crisis of 2007 negatively impacted many homeowners with shaky financial histories, thousands of families are losing their homes without ever missing a payment. These residents are renters who had the unfortunate luck of living in houses whose landlords defaulted on their mortgages — a large but little noticed externality of the subprime fallout.

While it remains unclear many renters have been evicted because of foreclosures, the Mortgage Bankers Association took a survey earlier this year and found that one in eight foreclosures was non-owner-occupied. But the association acknowledges that this figure likely “underestimates the problem” because building managers have an incentive to register as owner-occupied for tax reasons, even if the units are rented.

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“A foreclosure doesn’t differentiate between a homeowner and a renter residing in a defaulting property.” Currently, most state or local laws do not provide this protection.

It's been a decade since I rented, but I seem to remember some kind of coverage for loss of residence.

But we have a policy of Relocation assistance if they cooperate with us and we don't have to do an eviction. (I work for a mortgage company doing REO ((Real Estate Owned)) Sales.)
Duckie

The "Loss of Use" coverage in any homeowners insurance policy (including a tenant's policy) only comes into play if the residence is rendered uninhabitable because of a loss that the property itself is insured against, such as fire or wind damage.

It's going to get much uglier.

then runs around paying his back bills in essence robbing Peter to pay Paul. He may have two or three houses that he is doing this with. His ARM had reset and he's tapped out. Rent to someone. get fast cash, and cover the bills that keep the owner going, like his car payment on the Escalade, and his own house.

Look on Craig's List in Phoenix, you smell the desperation. Some of the imbeciles want one and a half times the rent at move in, and a non refundable. Others have stopped drinking the Kool Aid and priced their house to rent accordingly.

This happened to my sister. We moved her, her husband and three kids into a house. That afternoon someone came to the door and said it was up for auction. The next day was a nightmare. Of course my sister being the type she is did not investigate at all into the situation the house was in, but...

Oy.

Why would they evict someone that was paying them money? I am fairly certain having tenants is a selling plus in this housing market..

They were paying the landlord the money who wasn't paying the lender the money. And upon foreclosure, they no longer have a valid lease.

They do have a lawsuit against the landlord for default. But if the landlord has been foreclosed on, it is doubtful they will get anything out of a lawsuit. I am not sure about the law but I believe most lenders do give notice of intent to the tenant and such notice is legal in the states involved. Lenders do not want to end up being sued by a tenant in addition to having to deal with a foreclosure.

Having a tenant is fine if you are selling the house to an investor looking for rental income. But in most cases, an investor wants to negotiate their own terms and have their own lease. It would be nice if the lenders honored the lease agreements but then they would have to set up a department to keep track of it. That's not feasible.

.....take payments directly from the tenants if the landlord is in default. I don't know how often it's used.

You are right in that the lenders probably don't want to deal with being a landlord. On the other hand, the "REO" departments of the large lenders will probably have to adapt, in this market, to manage and protect their investments. Collecting rent seems like a better idea than letting a property sit vacant for two years.

I'm wondering if, like the article states, how many of these cases involve the lender not knowing there is a tenant.

My friend rented an apartment only four month ago (she pays $1550). She panics right now because she heard, the App. will be on the market very soon.
What does she have to do?
She spent all her money by moving from Seattle WA to FL.

Can somebody have any clue, if there is any protection?

Does she have a lease?

If she has a lease, then I don't believe the new owners can evict her until the lease is up.

If her appartment is part of an appartment complex, then the likelyhood is that the new owners will want her to stay... It is income that will help them pay the mortgage on their new investment.

If the appartment is going condo, then the lease still must be honored.

If she does not have a lease and is on a month to month verbal rental agreement, then the owners are only required to give her fifteen days notice to quit the premises.

subject to any/all leases already in effect. However, they won't have to renew any lease at any of the previous terms. Bear in mind that apartment complexes change hands from time to time. That said, she may want to start looking for another place to go in 8 months.

I live in Florida and was evicted from my apartment in the middle of my lease because a wealthy developer (David Segal) wanted to turn my apartment into a time share. Those of us with many months left on our leases did all that we could to try to stay, but there were no laws to aid us. They started their renovations even before we were moved out! In the end I bought a home to avoid going through the same thing in the future, and I'm glad that I did.

I would strongly suggest that if she intends to stay down there for more than 5 years that she buy a condo.There's a real glut of them in that area and she should be able to find a nice one for as much, if not less, than what she was paying in rent for the monthly payments.

At least on the SW coast, rents have been dropping steadily for the last year.

Lots, I'll bet.

especially in today's real estate market.

That rent money might be the only income available on the foreclosed houses for quite some time.

As long as paying renters occupy the houses, there is income coming in to help offset the defaulted mortgage and the property is occupied which discourages vandalism, pest infestation, and is useful in the upkeep of the house.

Seem to me like the mortgage companies are throwing out the baby with the bathwater.

The subprime and foreclosure mess is the Frankenstein created from the greed of the "investor class".

First, we were supposed to believe that ENTIRE neighborhoods in low-income communities collectively "tricked" savvy mortgage brokers into "giving" them home loans. And, its because of "their" greed they are losing their homes.

Then, OK, maybe, some mortgage companies like countryslide were devious.

No one questions the underlining mechanism that allows the housing market and RENT to climb as wages remained stagnant while homelessness and housing inventories excess exists.

It was the rent increases that drove individuals into the artificially stimulated housing market.

The same greed from the "investor class" that created this crisis WILL NOT allow housing to normalize. Meaning, in the new "ownership society" there will still be $200,000+ homes and unimaginable rental rates in neighborhoods where the average income is $32K.

There is NO END in sight.

Renters are essentially serfs.

In my state if an investor owners buys a a house/condo the new owner must respect any existing contract - a lease, an HVAC contract, a landscaping contract, etc. The problem is that most real estate agents don't understand or respect this encumbrance and most new owners (that includes lenders) don't know it either. And, sadly the tenants don't know it and get pushed out even though they have an existing contract.

The lender should be obligated to honor that contract as well. I would guess, however, that part of the problem is the lenders that are taking back houses don't have a way to become a leasing company and manage the leasing contracts. Therefore, they are just letting/telling the tenants to move on. If they fought back I think the tenants would win.

Federal judge accuses mortgage lenders of hijacking foreclosure system for profits

are supplying the money for it? I owned a duplex in Gainesville, FL, and just one unit's rent was almost equivalent to an entire mortgage payment. People have to be pretty stupid not to pay a mortgage when the money to do so is literally handed to them.

Well, before he paid off the mortgages on his rentals, anyway. What are they doing with the money if not paying the mortgages and upkeep with it?

The money brought in from renters isn't covering the payments anymore. With ARM house payments jumping a thousand or more a month for houses, you can imagine what they're jumping up on apartment payments. Factor in rises in property taxes, utilities, etc, and what you have is the spectacle of many foolish owners getting burned hard and going under, sadly taking their tenants with them.

That said, all of my sympathy is with the tenants, not the landlords. The landlords were greedy idiots who saw dollar signs instead of reality, and got in over their heads without a clue about what they're doing. Sadly, they're taking others down with them.

from Crosses, please, I beg of you, do it, the world is waiting and is sorely in need of it. amen

Whelp, I guess you can see why I'm not ever asked to lead the prayer at the Thanksgiving or Christmas dinners

(and just to be perfectly clear: by "either of them," I mean "lord" and "Jesus")

:hide:

LOL...

A new class of "indigents" brought to you by profit.

How many of the renters are now renters because they got caught up in the sub-prime debacle? So, they rent. And their credit is hosed and they have a foreclosure on their "official record". Who will rent to them now?

How many of them will be able to cobble together the moving costs and deposits needed for a new place to rent in the amount of time given? Especially since rents will go up as others caught up in the sub-prime mess are trying to recoup their inflated mortgage payment.

We've created a new class of Americans; the working homeless.