Senate and House Pass Protections for Tenant in Foreclosed Properties
Capitol Hill
Memo to Members: Vol 14, No. 18, May 8, 2009
Both the Senate and the House have taken significant steps to provide protections for tenants in foreclosed properties. Enactment of federal tenant protections from displacement due to foreclosure has been a top priority of the National Low Income Housing Coalition for over a year.
On May 6, the Senate passed S. 896, the “Helping Families Save Their Homes Act of 2009.” This bill, a companion to H.R. 1106, which passed the House March 5 (see Memo, 3/6), makes permanent the Federal Deposit Insurance Corporation (FDIC) deposit insurance limit of $250,000, protects servicers that modify mortgages from liability for violations of the servicing contract, and amends the Hope for Homeowners program in order to encourage more households to participate.
During Senate consideration of S. 896, several significant amendments were offered and adopted, including an amendment to protect renters in foreclosed properties.
Senator John Kerry (D-MA), joined by Senators Barbara Boxer (D-CA), Christopher Dodd (D-CT), Richard Durbin (D-IL), Kirsten Gillibrand (D-NY), Edward Kennedy (D-MA), Jeff Merkley (D-OR) and Harry Reid (D-NV), offered an amendment to S. 896 to provide important protections for tenants in foreclosed properties. The amendment, which was adopted by a vote of 59-37, would provide tenants in foreclosed properties with at least 90 days notice before eviction from a foreclosed property. Tenants with leases would be allowed to remain for the term of their leases unless the property was purchased by someone who intended to live in the home, in which case they would still be given 90 days notice. In addition, the amendment would provide tenants with Section 8 vouchers an opportunity to remain in their home after foreclosure for the term of lease with their rental assistance intact unless the property is sold to an owner-occupant.
In speaking for the amendment, Senator Kerry recounted the experience of one of his constituents who came home one day to find the home he rented locked with a foreclosure notice on the door. “It is well documented how foreclosure is already overpowering countless numbers of homeowners who are unable to pay their mortgages, but foreclosure is also causing a rampage of sudden evictions of renters. My amendment would stop that rampage and help unsuspecting renters from falling victim to foreclosure in which they played absolutely no part,” Senator Kerry said.
In expressing his support for the amendment, Senator Dodd, chair of the Committee on Banking, Housing and Urban Affairs, also described the plight of renters in foreclosed properties. “People have asked whether this bill is going to make a real difference for real people. This amendment makes a real difference for real people, and is exactly what we ought to be doing. These were not the people who caused the problems they are in. These are the victims of what is occurring,” Senator Dodd said. Senator Gillibrand also spoke out in support of the amendment. She noted that a quick eviction following foreclosure was particularly hard on low income families, calling the effects of such an eviction “catastrophic” for these families.
The House also adopted strong protections for tenants in foreclosed properties when it passed H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act, on May 7. H.R. 1728, which was sponsored by Representatives Brad Miller (D-NC), Mel Watt (D-NC), and Barney Frank (D-MA), chair of the Committee on Financial Services, passed the committee on April 30th (see Memo 5/1). Like S. 896, H.R. 1728 would require 90 days notice before eviction for all tenants in a foreclosed property and allow tenants with leases to remain in their home for the term of their lease unless the house is purchased by someone who wants to live in the house. In such cases, the tenant would still get 90 days notice before they would be required to vacate. Tenants with a housing choice voucher would be able to remain in the property with both their lease and rental assistance payments intact.
During House consideration of the bill, one amendment was adopted that would limit the tenant protections. Representative Ed Perlmutter (D-CO) offered an amendment to reduce the notice period to 30 days when the borrower had rented the home in violation of the mortgage contract and the purchaser intends to occupy the unit. The amendment would have required the new owner to provide the tenant with the mortgage documents that establish the violation. Representative Keith Ellison (D-MN) spoke out against the amendment, noting that tenants are the innocent victims of the foreclosure crisis and reducing the time for a “violation” of which they had no control or notice does not make sense.
Additional tenant protection amendments were included in the manager’s amendment for the House bill. Representative Bob Filner (D-CA) sponsored an amendment to require landlords to notify tenants or prospective tenants of a default or foreclosure associated with the rented property.
An amendment to provide protections for tenants of troubled multifamily properties, which was originally offered by Representative Nydia Velazquez (D-NY), would require the Secretary of Treasury to establish a program to stabilize multifamily loans at risk of default or disinvestment. The program must ensure the protection of current and future tenants by creating sustainable financing based on the actual income and preservation needs of the property, maintain any federal, state and local subsidies and facilitate the transfer of such properties to responsible new owners. The Secretary of Treasury must coordinate with the Secretary of HUD, the Federal Deposit Insurance Corporation and other federal agencies in carrying out these provisions.
H.R. 1728 will now be sent to the Senate and S. 896 to the House, and the next steps will be for the two houses to agree on the provisions of each bill.
Read NLIHC’s statement on the renter provisions at http://www.nlihc.org/detail/article.cfm?article_id=6033&id=48
