Steps of Foreclosure

Foreclosure and Renters

The mortgage industry crisis that started in 2006 has resulted in millions of foreclosed homes. Most of the individuals in the foreclosed homes are the homeowners themselves, but a grower number of the individuals living in the foreclosed property are people who are renting. Most of these renters have been making their monthly lease payment on time, however the landlord has not been making the mortgage payments to the bank.

Banks are kicking good tenants onto the streets with little to no notice after seizing a property from a delinquent owner, totally ignoring tenant leases. Some of these renters who are in a low-income bracket are forced into shelters because they have very little savings to cover moving costs, first month's rent and a security deposit at another apartment.

Fannie Mae is starting a new renter policy in January 2009 which will provide renters with some protection. The plan will allow renters living in foreclosed properties to sign new leases with Fannie Mae while the property is up for sale, or give the tenants money to relocate. Freddie Mac is also planning to announce a similar program. Because renters typically don't know the details of the type of mortgage the landlord has on the property, Fannie Mae is planning on contacting renters in foreclosed properties to make them aware of the option to stay in their home through a lease with Fannie Mae.

If you are a renter and receive a foreclosure or eviction notice, don't panic and don't stick your head in the sand. Neither one of these actions will help you. The first thing to do is call the sheriff's department and find out how long the foreclosure process is for your area. The next thing to do is get on the Internet and find out the rental laws in your state. The lender's name for the property will be on the eviction notice. Contact them to let them know that you are living in the property. Find out what your options are. Maybe the bank will let you sign a new lease or they might be offering some cash assistance to help with moving costs. Don't let the lender bully you into moving out sooner than stated by the laws in your state.