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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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

  • I recieved a Notice of Substition of Trustee. The recorded date that shows on this notice when my mortgage lender appointed the as a successor trustee shows a recording date of September 15, 2008. Which today is September 2 , 2008, so how can something have been recorded on a date that has not even happened yet? The sale is scheduled for September 5, 2008. What are my legal rights as to getting this sale postponed?
  • What are home owners liabilities during foreclosure
  • Is a single unit in a large condominium complex treated the same as a single family residence under the AZ anti-deficiency statutes?
  • We recently (7/29/14) lost our home to foreclosure, the question I have is that when we initially bought our home in Oct. 2004 the purchase price was $125,500.00 with a 3 yr arm. we then refinanced to get a fixed interest rate and got some cash to pay off debt, the refi amt was $171,000.00 that was about 5 or 6 yrs ago and now fast forward to 2014 I get a statement from the bank saying we owe $224,600+ thousand dollars on the home, how does my debt increase to that amount and is this legal?
  • We had an 80/20 mortgage on our home. In Feb it was foreclosed on. The first lender shows as a foreclosure but the 2nd lender(chase) shows as a charge off. I was told that there is something in the state of AZ that requires both lenders to report it as a foreclosure. Is there a provision code that I can contact Chase with to have the reporting changed to Foreclosure? Thank you..
  • Last year we fell behind on our home payments. We tried to work with the lender for months, Instead they set a foreclosure date. We only owe $265,000 plus the arrears on our home which is now appraising at $422k. We were forced to file Ch. 13 in order to stop the foreclosure and save our equity. My spouse now has a high income job offer out of state. We want to rent out our home instead of selling & dismiss the BK but still owe over $18k in arrears. With our bad credit due to the BK, what are our options for getting a loan to pay the arrears? Our home will rent for $2800 and our payment is 2k.
  • We are tenting a beach house that is not in foreclosure yet but the landlord is not making her payments. We signed a 1 year lease. How long before the house will go into foreclosure? And when it does how long before we need to get out?
  • We currently have a mortgage on our home as well as a home equity line of credit. If the first mortgage company forecloses on our property, can the bank that we have a home equity line of credit sue us or file a judgement on us for the amount of the home equity line of credit we used?
  • I was in the midst of a loan modification review and was told they granted me a 30 day extension on my foreclosure. I have now come to find out they never did the 30day extension and my house was sold. Do I have any legal recourse?
  • how long does the foreclosure process take before you're kicked out of your home completely?

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