New law gives relief to renters of foreclosed homes

As foreclosures continue to pile on the market and defaulters are put on the street, one group is often forgotten – renters.

The National Low Income Housing Coalition estimates that 40 percent of the households that lose their homes to foreclosure are renters evicted after the bank takes the home from their landlord.

“Renters being kicked out of properties that are going into foreclosure is a big problem in the state,” said Richard Rhey, executive director for the Southwest Fair Housing Council.

Rhey added the only notice renters often get when a property switches hands is a five-day eviction notice.

“It is the new owner that decides if they want to maintain the lease or not, but in the case of a foreclosure, the new owner is often the bank and that answer is no,” Rhey said.

However, all that is changing. A few weeks ago, President Barack Obama signed into law a foreclosure prevention bill that requires lenders to let tenants who pay their rent on time remain in their home until the end of their lease, unless the bank sells the property to someone who intends to make it their own residence.

Even without a lease, renters must be allowed to stay in their home for 90 days after the foreclosure. The provision is scheduled to expire at the end of 2012.

Danna Fischer, legislative director for the National Low Income Housing Coalition, said the law is based on the expectation that a renter would continue to pay their monthly rent to either the bank or the person/entity that has assumed control of the property.

“This is a good start at protecting renters,” Fischer said.

However, she added a good next step would be for states to require that renters are notified at the beginning of the foreclosure process.

“It would give them more time,” Fischer said.

Ken Volk, president of the Arizona Tenants Advocates and Association, said that his organization received more than 1,000 calls from renters in a foreclosure situation last year and continue to receive multiple calls daily.

“This is a big problem,” he said.

Volk and his organization are pushing a piece of legislation at the state level that would require the lender to notify the borrower and the renter if a foreclosure proceeding is imminent. Originally Volk also had language in the proposal that would allow a renter to recoup a deposit, but legislative committees have since removed it.

“This new federal law is a great step to finally giving renters in Arizona some rights,” he said.

Photo by Ron Hollis