The Housing Affordability and Stability Plan announced by President Barack Obama offers considerable promise to homeowners who are at risk of losing their homes due to foreclosure. The National Low Income Housing Coalition is hopeful that the Presidents plan will reduce the number of home-owning families who are evicted from their homes because they no longer can afford their mortgage payments.
However, the plan does not appear to provide relief for renters who are losing their homes because their landlords have been foreclosed upon. Approximately 40 percent of the households who face eviction because of foreclosure are renters. In most states, renters' tenancy is terminated automatically at foreclosure of a property. In many states, there is no requirement that tenants even be notified of foreclosure. However, in New Jersey and the District of Columbia, tenants are protected from eviction due to foreclosure.
The National Low Income Housing Coalition and other advocates for low income renters have urged the establishment of federal protections for renters that will require the entity that takes possession of a renter-occupied property at foreclosure to honor the existing lease or provide a minimum of 90 days' notice for the tenant to vacate the property.
"Renters are the least blameworthy of all the victims of the foreclosure crisis," said NLIHC President Sheila Crowley. "It is unconscionable that someone who has been a lease-abiding tenant, paying the rent on time, be evicted with little or no notice because the landlord has defaulted on the mortgage. It also does not make sense to get rid of a tenant who provides an income stream for the new owner and prevents a property from sitting vacant. An occupied house with a good tenant is far preferable to an unoccupied house for both the new owner and the surrounding neighborhood."
Protections for some renters have been included in recent federal legislation. For example, the economic stimulus bill just signed by President Obama requires that tenants in foreclosed properties purchased using new Neighborhood Stabilization Program funds receive a minimum of 90 days notice before eviction and be allowed to remain for the term of their leases.
Under the October 2008 legislation that created the Troubled Asset Relief Program (TARP), the Treasury Department is required to coordinate with federal entities, including FDIC, the Federal Reserve, the Federal Housing Finance Agency, and HUD, that are holding troubled assets to permit "bona fide tenants who are current on their rent to remain in their homes under the terms of the lease." In addition, in the case of residential rental properties, Treasury is required to maintain federal, state, and local rental subsidies and protections, and ensure that loan modifications result in financially viable projects. No regulations implementing these provisions have been issued. However, in response to a suit filed by a tenant in a property that had been foreclosed upon by Fannie Mae, Fannie Mae and now Freddie Mac have announced policies that will allow renters to stay after foreclosure.
"We urge Treasury Secretary Geithner to use his authority to require all institutions that receive TARP funds at a minimum to honor the leases of existing tenants in properties they acquire through foreclosure," Crowley said. "A great deal of harm to innocent families could be prevented if he acted now."
Advocates will continue to seek legislation to provide additional federal protections to address all renters affected by foreclosure.
For more information, visit www.nlihc.org.