Thursday, July 9, 2009

Tenants in Foreclosure Properties Are Now Protected Under Federal Law

If you are a tenant, that happens to be living in a property in foreclosure. No need to sweat. There is a recently enacted federal law that gives tenants time to get it together and move or even stay.

If you purchase a property at a foreclosure sale or you are a lender that takes the property at a foreclosure sale and there are tenants in the property, you better start sweating.

Under the Helping Families Save Their Homes Act, a tenant has the right to stay in the property after a foreclosure sale for a minimum of 90 days. If the tenant has a lease, then THE LEASE STAYS IN EFFECT after the foreclosure sale.

Now let's review specific provisions of the relevant law under sections 701 to 704:

This law helps tenants stay in a property after foreclosure. Most important if a tenant has a "bona fide" lease, then the tenant gets to ride it out.

So the net effect is this. No one will bid for a property at a foreclosure sale that has tenants in it. The lender will end up taking the property back. More properties on the books of lenders. Not good for lenders. Lenders are in for it now. A big positive is that lenders will have an incentive to modify a mortgage loan or strike a deal before a foreclosure sale, if the property has tenants.

I must admit, I like this law because it tips the scales towards the people and away from the lenders.

We'll talk about this some more later on. Enjoy your day.

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