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Tenant Protections in Foreclosure

posted by Katie Porter

A foreclosure has a ripple effect, as a number of commentators have observed. Foreclosed properties often sit vacant, leading to nuisance concerns, lower property values for neighboring houses, and higher crime rates. But some properties are not vacant on the day of foreclosure, and these occupied properties generate their own externalities. 

After foreclosure, the new owner (usually the lender is the purchaser at the foreclosure sale) will typically send someone to see if the property is vacant. If not, the lender files an eviction or lawful detainer action. In many instances, especially in those formerly-booming real estate markets like Florida and Nevada, the occupants are tenants, not the homeowners. Depending on state law, renters often have no right to notice of the foreclosure and no right to remain in the property. The Chicago sheriff, Thomas Dart, stopped doing evictions after foreclosure last fall because of concerns about unjust harm to tenants. 

Title VII of the Helping Families Save Their Homes Act provides uniform federal protection to tenants after foreclosure--at least until the law expires on Dec. 30, 2012 (apparently the date by which someone thought the foreclosure "crisis" will have abated). The law requires the new owner of a foreclosed property to allow tenants to stay in the foreclosed property for the remainder of the lease. If there is no lease, or if the lease is terminable at will under state law, tenants must be given at least 90 days' notice before they may be evicted. This is a floor that does not preempt more generous state law. 

I'm interested in how financial institutions and tenants are going to deal with these requirements. Lenders have attorneys who routinely handle evictions after foreclosure. Being a landlord is a different task. Are tenants supposed to call the former owners' mortgage servicer when their pipes burst? If not, how is the tenant supposed to learn exactly who is the new owner of the property? Are note holders actively hiring property management companies to comply with this rule? Perhaps more interestingly, the bill doesn't seem to permit an eviction during the 90 days even if the tenants declare they aren't going to pay a dime of rent!

The Office of the Comptroller of the Currency has hardly offered answers to national banks. After waiting three months after the law's effective date, it put out a one-page release advising banks to "adopt policies and procedures to ensure compliance." Gee, that's helpful. I'm betting the readers of Credit Slips will have some more concrete thoughts about this.



re: Disregarding Blatant Proof of Wells Fargo's Egregious Deceptive Practices Could Result In A Worse-Than-Madoff Situation

Mr. President:

PLEASE launch probes into self-evident false IRS form 1099-A's connected with foreclosures. A mere look at Wells Fargo's false 1099-A's will expose various White Collar real estate & foreclosure fraud (carried out for years) -likely, another S&L mess! Further, the recent controversy about former Wells Fargo (WF) senior vice president, Cheronda Guyton's use of the Malibu home which the owners lost due to Bernie Madoff, is unwitting exposition of deceits associated with foreclosure and repossessions. Moreover, Wells Fargo's internal investigation into the Malibu matter has glaring appearances of coverup -particularly because WF implausibly announced Ms. Guyton acted solely when it fired only her.

Specifically, non-legal foreclosures filed DELIBERATELY in courtrooms are for reasons such as: filing false Internal Revenue form 1099-A's for tax advantages; repeated property flipping (which leads to blighted neighborhoods); and Bankruptcy Court false motions to "Lift Stay" for purposes of achieving SIMULATED AUCTIONS. As such, loan modification is not in the interest of these sort of lenders. Ongoing news of courts dismissing foreclosure cases because of no proof of standing is not always a coincidence, or mistake.

Deliberately false foreclosures often name defunct mortgage companies or companies which no longer hold the notes, and contain fees in excess of "Acceleration Clauses," which makes it even harder for people to re-pay arrears. If property owners sue for "Unfair Debt Collection Practices," attorneys make more even $$$ through protracted litigations -which Wall Street Investors often incur the tab. In some instances, through use of a false mortgage holder's name, the debt collection lawyer actually is the disguised foreclosing plaintiff who wounds up with ownership of foreclosed property and flips it!

The reality is that SCORES of foreclosure cases -including some of Wells Fargo's have been dismissed because collection lawyers file foreclosure or Bankruptcy court proceedings without proof of being the proper party in interest. Accordingly, as it pertains to the minuscule information supplied by WF after its former vice president squatted and partied in the Malibu home; and in light of foreclosure frauds, here are some blatant questions about that home squatting incident, and about foreclosure that ought to be answered:

1. Because the Elin property had not yet been put on the market for public sale, how or why did -according Ms. Guyton- Collin Equities wind up owning the Malibu home after the Elins signed it over to Wells Fargo?

2. Was Collin Equities (in like manner as Wells Fargo operates here in Louisiana) a straw buyer for the Elins property, or did some sort of "simulated sale" occur whereby the property deed was (unlawfully) conveyed to Collin?

3. Considering Guyton's use of that Malibu home, and her reference to Collin Equities, was there kickbacks / quid pro quo activity between them or any other firm of which Guyton oversaw property ownership transfers?

4. Since Ms. Guyton was "responsible for commercial foreclosed properties," wouldn't it be the role of the person who is in charge of "Residential foreclosed properties" to permit Guyton to have access to the. . .

**This ENTIRE letter is posted at:
Barbara Ann Jackson
Law & Grace, Inc

We often overlook the the effects that property markets play on renters. The bill in which you refer has recently been branded as templates for other entities needing tenant rights reformation.

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