Protections for Tenants in Foreclosed Properties Become Law
Capitol Hill
Memo to Members: Vol 14, No. 20, May 22, 2009
On May 20, President Obama signed S. 896, the Helping Families Save Their Homes Act (Public Law 111-22). This important law includes much-needed protections for tenants living in foreclosed properties, as well revisions to the McKinney-Vento homeless assistance programs long sought by advocates (see related article). The renter protection provisions of the law became effective May 20, 2009, immediately upon enactment. Passage of the protections was a major priority of NLIHC.
S. 896 was passed by the Senate on May 6 with the tenant protections and the McKinney revisions (see Memo, 5/8). The House took up S. 896 on May 19 and passed the bill with some minor changes. The Senate passed the revised bill the same day and sent it to the President for his signature.
The White House issued a summary of P.L. 111-22 in conjunction with the bill signing, in which the Administration noted that, “One of the often overlooked problems in the foreclosure crisis has been the eviction of renters in good standing, through no fault of their own, from properties in foreclosure. To address the problem of these tenants being forced out of their homes with little or no notice, this legislation will require that in the event of foreclosure, existing leases for renters are honored, except in the case of month-to-month leases or owner occupants foreclosing, in which cases a minimum of 90 days notice will be required.”
“Because many responsible renters are being unfairly evicted from homes that go through foreclosure because the owners haven't been paying their mortgages, [the bill] requires banks to honor existing leases, or provide at least 90 days notice for renters on month-to-month leases,” President Obama said upon signing the bill.
For renters in foreclosed properties, the new law will require that the “immediate successor in interest,” i.e., the person or entity that acquires the title at foreclosure:
- provide bona fide tenants with 90 days notice prior to eviction, or
- allow bona fide tenants with leases to occupy the property until the end of the lease term, except the lease can be terminated on 90 days notice if the unit is sold to a purchaser who will occupy the property.
A bona fide lease or tenancy is one in which the tenant is not the mortgagor or a member of the mortgagor’s family; the lease or tenancy is the result of an arms-length transaction; and the lease or tenancy requires rent that is not substantially lower than fair market rent, or is reduced or subsidized due to a federal, state or local subsidy.
The new law also provides specific protections for recipients of Section 8 assistance, including the requirement that the person or entity acquiring the property at foreclosure take ownership subject to the lease between the prior owner and the tenant, and subject to the housing assistance payments contract between the prior owner and the public housing agency.
None of these provisions preempt more protective state and local laws. All the renter protection provisions expire at the end of 2012.
“This bill brings long overdue relief for the most blameless victims of the foreclosure crisis—the families who, after paying their rent each month, are suddenly told they must move out of their homes because their landlords have been foreclosed on,” NLIHC President Sheila Crowley said in a statement. “We applaud Senator John Kerry (D-MA) and Representatives Keith Ellison (D-MN), Carolyn McCarthy (D-NY), Michael Capuano (D-MA), and Barney Frank (D-MA) for making passage of this provision a priority. We will work closely with the Obama Administration and our network of state and local housing and homeless advocates to make sure not one more renter is evicted due to foreclosure. ”
In addition to providing tenant protections and revising the homeless assistance programs, P.L. 111-22 will make it easier for borrowers to use the Hope for Homeowners program, extend the $250,000 limit on insured deposits to December 31, 2013, and provide protections for servicers who modify troubled mortgages.
Because the rental provisions are effective immediately, it is important that advocates disperse information about the changes broadly. Copies of the NLIHC press release on the bill and a summary of the tenant protection provision can be found at http://www.nlihc.org/template/page.cfm?id=159
The final bill is available at http://www.nlihc.org/doc/S-896.pdf and will be available at http://thomas.loc.gov
