Beverly was doing
everything right. A Cincinnati resident, she paid her rent on
time and thought of herself as a good tenant and neighbor. It wasn’t until she returned home after a
weekend with family to discover that she was locked out that she realized
something was very wrong.*
Over
the next few days, Beverly
learned that her building had been foreclosed upon and had to hire a lawyer to
regain access to her own apartment. Once
inside, she discovered that the new owners had disposed of all of her
belongings, from furniture to personal effects.
Through
no fault of her own, Beverly
was suddenly homeless.
What
she may not have known is how common her story has become. Despite media focus
on suburban homeowners and subprime speculators, 40 percent of families facing
eviction due to foreclosure are renters, and 7 million households living on
very low incomes (31 - 50 percent of Area Median Income) are at risk of
foreclosure.
The catastrophe of a foreclosure can be
even more devastating for tenants, who are both more likely to be poor and
almost entirely at the mercy of their landlords for information.
Between 2007 and 2008 there was a
3.8 percent increase in the share of families that moved from living in a
rental situation to living in a homeless shelter, according to the Department
of Housing and Urban Development’s (HUD’s) 2008 Annual Homelessness Assessment
Report to Congress. This large increase may reflect the effect of the
foreclosure crisis on renters.
Even
if a tenant can determine a property’s successor, it is often a large financial
institution with little interest or expertise in managing property. The former landlord typically disappears,
leaving utility bills but taking the security deposit.
Until
last year, tenants like Beverly
had almost no legal protections because, in 49 states, leases terminated at
foreclosure. In response to advocacy by
the National Law Center on Homelessness &
Poverty (the Law Center—where I am the Housing Attorney) and other groups,
President Obama signed the Protecting
Tenants at Foreclosure Act (PTFA) in May 2009.
The
PTFA is the first law to grant federal protections to tenants living in
foreclosed properties, including the right to receive a minimum of 90 days’
notice before being required to leave the property. In most cases, tenants have the right to
remain in their homes until the end of their leases.
While
these protections are vitally important, the PTFA is hardly perfect. At the
federal level, no single body is responsible for implementation or enforcement.
Although HUD, the Office of the
Comptroller of the Currency (OCC), and the Federal Reserve have all issued
guidance, the alphabet soup of overlapping federal agencies adds to the chaos
of an already muddled process.
A
year after its enactment, tenants around the country are mired in litigation
with lenders over violations ranging from blatantly illegal evictions to
inaccurate notices and fishy “cash for keys” deals. Meanwhile, owners often fail to communicate
with tenants, an information vacuum that goes hand-in-hand with poor building
maintenance.
In
June, the Law Center released Staying Home: The
Rights of Renters Living in Foreclosed Properties, a report detailing
laws passed at both the federal and state levels to protect these tenants’
rights since February 2009. Since then, 16 states have passed new laws relating
to tenants at foreclosure. States from Maryland to Missouri
clarified the timing and content of the notice, while a handful of legislatures
recognized the quality-of-life issues that spring up during foreclosure. New York now
requires that the successor-in-interest continue to maintain the property,
while Maine and Wisconsin allow tenants to withhold rent if
the property is not adequately maintained.
The
Law Center applauds these actions, but there is much to be done before all
tenants are adequately protected. HUD, the
Departments of Veterans Affairs and the Treasury, and other federal agencies
must establish a uniform system to track and respond to violations. Regulatory bodies like the OCC have a
responsibility to monitor banks, while the Federal Trade Commission (FTC) has
the scope and authority to take action against non-bank actors. Needless to say, banks and other businesses
involved in the foreclosure process have a responsibility to educate themselves
about the law and adequately self-police.
State
legislatures must enact new laws, or pass pending legislation, to affirmatively
expand the PTFA. Particularly important
are laws that would clarify and expand the notice requirements, so that tenants
are promptly notified that their homes are subject to foreclosure but that they
do not have to move immediately. State
attorneys general should target those at odds with the law with cease and
desist actions or litigation.
Finally,
advocates can expand efforts to educate tenants, landlords, and housing court
judges about the PTFA and relevant state laws.
Because illegal evictions often happen quickly, it is important to
identify and reach out to vulnerable populations as soon as possible. Grassroots advocates should consider forming
statewide coalitions to better facilitate these efforts.
Most
urgently, Congress must make the PTFA permanent. The law is set to expire on December 31,
2012. With no possibility of a
meaningful economic recovery by that date, many renters will be facing an even
worse environment without the basic rights provided by the PTFA. Lawmakers must not ignore the millions of
tenants whose homes are at risk through no fault of their own.
Geraldine Doetzer
is the Housing Attorney at the National Law Center on Homelessness &
Poverty.
*Name has been changed to protect the individual’s
privacy.
Viewpoints in this section solely represent the authors’ opinions and not the opinions of "Spotlight on Poverty and Opportunity."