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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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

  • My house was place in auction we spend about 30 years living there my original loan was 50.000 by USDA how do I get the full information. sold auction quantity and excess of funds I have contacted Home Equity Invs they informed me that the house was auctioned for 38.000 and i have excess of funds 16.000 how do I check if is true.
  • I have recently reviewed our finances and determined that we can no longer afford our home. We are not late and have not missed any payments. I have come in contact with a law office based in CA that offers loan modification, short sale, and deed in lieu services. If we opt to pay someone to negotiate for a loan modification with our lender am I less likely to fall victim to scam with a law office?
  • I have a trustee sale date on my house 10/10/2013. Have a review for the Dept. of Justice modification still in review. Have had 9+ letter/certificates from (Proper name redacted) , paperwork has been filed with the maricopa County Recorders office as well of Foreclosure listed on my credit report. I am job hunting as well and many employers put in requirements a credit check so this makes it even more difficult for employment. I want to keep my home and receive an "affordable" modification ,not one which is higher than my original payment. Please advise help for me. Thankyou...
  • MY HOUSE IS IN FORECLOSURE NOW, WITH A SALE DATE OF NOV 13. CAN I DECLARE BANKRUPTCY AND KEEP MY HOUSE?
  • I filed Chapter13 approx 2years ago. We chose to surrender our home and the Trustee sent a letter to the mortgage company, lifting the stay so they could proceed with foreclosure. The mortgage company sold the mortgage to another company, that company sold it to another. The new mortgage company says we are still the owners. Where do we stand legally and how long can this go on?
  • Should I be held responsible for the HELOC on my house held by a different bank than my first mortgage that was foreclosed upon?
  • Is there protection for tenants in foreclosure actions now that the federal act's sunset provision has taken effect?
  • My home was sold at a foreclosure auction on 11/22/16. I have never been served a 3 day notice by the new owners just a Summons and Complaint. They want me out of the property and want to charge me an outstanding amount of money and I cannot afford to pay it. They are trying to get a default and judgment against me and I am living in the house with my 8 year old granddaughter. I work 4 days a week and need time to secure another place for us to live. These people are very unreasonable and want me out. I have lived there for 23 years and am having alot of anxiety over this. HELP
  • Are the lenders able to work with you even if your only 1 month behind. they sent us a letter giving us a certain date to catch up and what would happen if this didn't occur.
  • the house i live in is being forclosed on, i am the rentee. can i stay in the house for the term of the lease

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