Foreclosure Article


WHAT IF I RENT A HOUSE THAT'S IN FORECLOSURE - The Protecting Tenants at Foreclosure Act

 The Protecting Tenants at Foreclosure Act

This law expired on December 31, 2014

 

IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014. While there were some attempts in the House to revive this law in 2015 none have been successful. Arizona State Law, A.R.S § 33-1331, gives tenants of foreclosed properties some limited protections; information about these protections can be found in this article. This article remains on AZLawHelp.org purely for historical value for those interested in how the Protecting Tenants at Foreclosure Act operated from 2009 through 2014.

There are legal protections for tenants renting a house that is in or goes into foreclosure. The Protecting Tenants at Foreclosure Act (PTFA) was passed by Congress signed into law by the President Obama in 2009; subsequently the law was extended in 2010. The PTFA expired on December 31, 2014. The PTFA, depending on the facts in a particular situation, requires that renters in foreclosed homes be allowed to stay or given sufficient notice under the law.

  

Who qualifies for protection under the PTFA?

The tenant protection provisions apply in the case of any foreclosure on a “federally related mortgage loan” or on any dwelling or residential real property. The tenant must also be “bona fide.” A lease or tenancy is “bona fide” only if:

  1. The mortgagor or a child, spouse, or parent of the mortgagor under the contract is not the tenant;

  2. The lease or tenancy was the product of an arm’s-length transaction; and

  3. The lease or tenancy requires the receipt of rent that is not substantially less than fair market rent or the rent is reduced or subsidized due to a federal, state, or local subsidy.

In other words the lease must be made with another person and not with oneself and the rent payments must be a fair amount for the property that is not supplemented by the government.

  

When do renters in foreclosed homes get to stay and when do they have to leave?

Renters Get to Stay IF:

Renters get to stay for the duration of the lease, if all of the following requirements are met:

  1. There is a valid lease (not the end of the lease term),

  2. The lease was signed before receiving notice of foreclosure (whether judicial foreclosure or trustee sale), and

  3. The new owner does not intend to occupy the property as a primary residence.

Renters Cannot Stay But Must Be Given Notice IF:

In most other situations, the renters will have to leave, once the foreclosure is complete, and upon receiving 90 days notice from the new owner. The common situations where a renter will have to vacate after the foreclosure upon receiving notice are:

  • Renters must vacate if there is a valid lease and they had notice of foreclosure before signing the lease; or

  • Renters must vacate if there is a valid lease, and even if there was no notice of foreclosure but the new owner intends to occupy the property as a primary residence; or

  • Renters must vacate if there is no valid lease, including where a lease expires and the renter is paying month-to-month. 

Why does the law end December 31, 2014?

The law has what is called a sunset provision, meaning it has an expiration date. The original date was extended in the “Dodd-Frank Wall Street Reform and Consumer Protection Act”, so that the law will be repealed on December 31. 2014. When laws are written, the legislative body writing the law may set a date of when that law will end, referred to as a “sunset” clause or provision (Note: Not all laws have sunset provisions, it is not required). The PTFA is a federal law, Congress would have to authorize and extension or make the law permanent and the President would have to sign it into law.

 

 

Source:  See 12 U.S.C. 5220 or search the US Code online with the US House of Representatives website. For additional information see the Consumer Financial Protection Bureau website.


Comments:

QUESTIONS

  • How can I legally kick out family members? I own home they have been staying with more for over a year. Some occasionally contribute to rent but mostly don't. I have asked severe times in past 6 months to love out now I have given a 2 month telling them by September 1st but doesn't look like ahyones making plans and just freeloading and being lazy and I can't take it anymore Mom brother, sister . How do I legally get them to leave ?
  • Is the law the same re foreclosure the same for a mobile home? I have vacated the property. Can my wages be garnished?
  • I am leasing a house threw a management company and found out that the house is in foreclosure and an auction date has already been set. The way I found out is the attorney for the lender posted the notice on our door not by the management company. I had to let them know. Am I still suppose to pay them the lease payment?
  • Landlord did not make mortgage payments. Bank is repossessing. Landlord gave me 30 days to get out, is this legal? There are no other rentals available in town at this time.
  • Is it legal for my lender to switch lenders and foreclose my house and sell at auction with out giving me any notification or giving me the option to file bankruptcy
  • My father passed away 1/16/2015. His is the only name on his home's deed. There is a reverse mortgage on the house and what is currently owed on the mortgage is more than the house is worth. My name is not on the deed and I don't plan on going to probate to get control of the house. The mortgage company is starting foreclosure. My question: is the estate, and me personally as the executor of the will, legally obligated maintain the homeowners insurance policy until the house is sold at the foreclosure auction which could take 1 to 2 years?
  • Due to piling credit card debt and a recent diagnosis of cancer I may be headed towards foreclosure on my condominium. My question is if I cannot save my home will I be subject to any deficiency judgments against me because my residence is a condominium? I've read about if the property being less than 2.5 acres and a single family dwelling is safe from deficiency judgments. Do condos fall under the same protection? Is there anymore light you can shed on this situation for me?
  • is "strict" foreclosure or "deed in lieu" foreclosure available in arizona?
  • I owned a house in 2005- when everything boomed it was way overpriced and there was a 1st and a 2nd. I went through a divorce and lost the home as it was upside down. It went into foresclosure and I never heard another word. This now 2019 and I received a letter in the mail saying the 2nd mortgage wants to settle with me for $5000 on a $92,000 note from that house- that was 13 years ago! Can they even do that? My house was upside down and then foreclosed on and sold.
  • My proprty is seduced to be sold today at a Trustee's auction. I had a new loan approved for past two weeks that would pay the existing note in full, the trustee deliberately withheld the final payoff statement until 4:59 p.m. on the day prior to the foreclosure, making it impossible to fund on the new loan in time to stop the sale. Is there anything we can do to stop the sale and buy ourselves a few days to get the new loan closed?

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