Renters are being seriously affected by foreclosures almost as much as homeowners these days. The downfall of the mortgage industry has resulted in millions of foreclosed homes.  Most of the occupants of these foreclosed homes are the homeowners themselves, but a great number of the occupants are renters who discover, often with no warning, that their rented house is now owned by a bank, which wants them out.


            The usual foreclosed home may have originally been occupied by the owner, but often it may be owned by investors hoping to profit from the rental of the home. Due to the downfall of the real estate market, these investors/homeowners have found themselves unable to rent these properties and subsequently unable to pay the mortgage.  When the owner of the property fails to pay the mortgage, the Bank becomes the new owner after a foreclosure proceeding. When the bank becomes the owner, many tenants have no idea that the property has been taken at foreclosure. They continue to pay rent to the former owner, who often pockets the money. Considering the banks are stuck with a staggering number of foreclosed properties that they can’t sell, the bank does not communicate with the renter in a timely fashion and only come in contact with them when the eviction process has begun.


            Before May 20, 2009, most renters lost their leases upon foreclosure. The rule in most states was that if the mortgage was recorded before the lease was signed, a foreclosure wiped out the lease (this rule is known as “first in time, first in right”). Because most leases last no longer than a year, it was all too common for the mortgage to predate the lease and destroy it upon foreclosure.  These rules changed dramatically on May 20, 2009, when President Obama signed the “Protecting Tenants at Foreclosure Act of 2009.” This legislation provided that leases would survive a foreclosure — meaning the tenant could stay at least until the end of the lease, and that month-to-month tenants would be entitled to 90 days’ notice before having to move out.


            Renters should be cautious when remaining in a property after the bank has taken ownership via a foreclosure proceeding.  Many banks hire local real estate agents or management companies to try and intimidate the Renter and force them out of the property.  No matter what type of tenancy you have, it is illegal for the bank to treat you as a trespasser or attempt to lock you out of the property by threatening to change the locks or shut off utilities.  Be aware that tenants in foreclosed properties holding a valid Lease have the same rights as the previous owner of the property.  Renters have rights, exert them. 

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