[quote author="usctrojanman29" date=1229541275]I have a friend who is renting a condo in Irvine and has discovered that the lender has filed an NOD on the property. He has less than 6 months left on his lease and is curious when happens to tenant during the foreclosure process. Should he try to contact to let them know that he is a tenant? What will happen to him after the bank takes the property back aftre the trustee sale? Can he expect some kind of payment from the lender to vacate the property after they take possession?</blockquote>
IPOP's right, legally speaking. But the below policy change by Fannie may alter the after-effects of a Fannie foreclosure. Article mentions that banks may be reluctant and/or powerless to adopt the same policy b/c they technically don't 'own' the property.
Remember, the NOD is only step one, and the owner could still cure the default at no detriment to anyone (save for the landlord's credit, I suppose). I have seen properties with a half-dozen NOD's, spread out over several years, always with 11th-hour cures. PM me the address, and I can look up the lender, trust deeds, NOD's, etc.
Fannie Mae to End Tenant Evictions in Foreclosures
Fannie Mae is finalizing a national policy that will allow tenants to remain in their homes even if their landlord goes into foreclosure -- a landmark decision for tenants.
The policy will be in effect Jan. 9, Fannie Mae said Sunday, and reflects growing pressure on the mortgage company from a legal-aid group that threatened to sue over recent evictions. The company said it will also ensure its current holiday moratorium on new evictions is being followed until the new policy takes effect.
"We're delighted that Fannie Mae has agreed to change their policy," said Amy Marx, an attorney with New Haven Legal Assistance in Connecticut. "And we're hopeful others will follow suit."
In late November Fannie Mae and Freddie Mac said they would suspend tenant evictions temporarily during the year-end holidays. New Haven Legal Assistance said that despite the pledge, Fannie Mae was proceeding with more than a dozen new eviction cases in Connecticut. The advocacy group said the evictions would violate legislation passed earlier this year to rescue the two mortgage-finance giants that required them "to permit bona fide tenants who are current on their rent to remain in their homes under the terms of their lease."
In his letter Sunday to the New Haven group, Fannie Mae General Counsel Curtis Lu wrote: "As far as we know, this will be the first nationwide program of its kind." Copies of the letter were sent to Christopher Dodd (D., Conn.), chairman of the Senate Banking committee and Barney Frank (D., Mass.), House Financial Services Committee chairman.
Freddie Mac hasn't announced a similar policy reversal, though a spokesperson said they are "currently evaluating additional actions."
The decision by the government-backed mortgage giants represents just a slice of the market and excludes many properties purchased with riskier loans that are now falling into foreclosure. Fannie Mae and Freddie Mac, however, are uniquely structured to be able to address the issue, which effectively now has them acting as a type of landlord or property-management company to administer month-to-month leases to renters of their foreclosed properties.
Ted Meyer, a spokesman for Deutsche Bank, one of the biggest trustees of mortgage-backed securities, said Deutsche Bank isn't in a position to be able to follow Fannie's lead on foreclosures.
Deutsche Bank has no capacity to intervene, Mr. Meyer indicated, saying "the whole issue comes down to ownership" of the foreclosed properties. A given property "is held in trust by us but it is effectively owned by the hundreds or thousands of people that own a tiny sliver of mortgages in any one pool," Mr. Meyer said.
It might fall to the local servicers of the mortgages to decide to halt evictions, he added, because they are responsible for steps such as hiring real-estate agents to put foreclosed properties on the market. It isn't clear how much power -- or will -- a servicing company has to effect a moratorium on tenant evictions.
It's a frustrating situation, says David Rothstein, a researcher at nonprofit group Policy Matters Ohio who has looked at the effect of such evictions in his state. "When there's a renter in these properties they're less likely to be vandalized, they're better maintained, and it's better for the communities," he said.
In a recent report Mr. Rothstein found foreclosure filings on renter-occupied units in Cuyahoga County, where Cleveland is located, were up 29% in 2007 from the previous year. The average cost of an eviction per family ran about $2,500 -- meaning a total $10 million loss of wealth, Mr. Rothstein said.
The social and economic pain of eviction has made the subject a regional cause more than a national one. That in turn has made it difficult for groups to marshal the political muscle to enact state or federal legislation barring tenant evictions in foreclosures.
A New York University study found at least 15,000 renter households in New York City were affected by foreclosure last year. Since then, the number likely has increased. In the Boston area, a group of Harvard University students has been going door to door notifying tenants of their rights in an eviction; many such tenants are unaware of their rights and accept "cash for keys" offers from lenders -- often $500 or $1,000 -- to leave.
"We had seen the devastating impacts of Fannie Mae offering cash for keys to tenants and evicting most of the rest," Ms. Marx said. "We eagerly await the implementation of the new policies."
Write to Kelly Evans at kelly.evans@wsj.com
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