What Rights Do Renters Have When Their Landlord Goes Into Foreclosure?

Imagine you’re a renter. You’ve been paying your rent faithfully every month. Then you come home from work one day to find an eviction notice on your door. Your landlord has defaulted on the property, a bank is the new landlord, and they’re forcing you to get out. What do you do?

For the past two years, the headlines have been dominated about housing foreclosures. One of the aspects of the foreclosure crisis that has received very little attention, however, is the role that rental properties have played in the housing slump. Many landlords have seen their properties go into foreclosure, and as a result, many tenants have found themselves in very dire straights. In Minneapolis alone, 65% of foreclosures have been on rental properties. Nationwide, it is estimated that 40% of people to lose their homes to foreclosure are renters. And according to a report by the Center for Responsible Lending, the number of rental properties going into foreclosure is expected to rise.

Fortunately, renters have very specific rights when it comes to the foreclosure process, thanks to a bill passed in April.

Protecting Tenants at Foreclosure Act of 2009
According to the Protesting Tenants at Foreclosure Act of 2009, banks or owners who obtain a property through the foreclosure process do not have the right to evict a tenant if a lease is still in effect. The exception is if the new owner wants to live in the property. In this case, tenants have to be served 90 days notice – which is much longer than the typical eviction process. In summary:

  • Leases would survive a foreclosure — meaning the tenant could stay at least until the end of the lease.  The lease survives and ends as it would had there been no foreclosure.
  • Month-to-month tenants would be entitled to 90 days’ notice before having to move out
  • Any state legislation that is more generous to tenants will not be preempted by the federal law
  • These protections apply to Section 8 tenants, too

Relocation Assistance
If Fannie Mae or Freddie Mac owns the mortgage on a foreclosed property, renters should consider themselves lucky. Both agencies have vowed to assist renters with the relocation process by providing money to help renters pay security deposits and first months’ rent on a new place to live. The only way that a tenant would know the details of their landlords’ mortgage is to wait for Fannie Mae or Freddie Mac to contact them. That can be a bit unsettling, because you may not have an exact time frame for that knock on the door. One real estate appraiser I talked to said that their office is so backlogged with foreclosed properties that it can often take 9-12 months before Fannie Mae takes action on a foreclosed property. However, the standard is that Fannie Mae will contact the tenant within 30 days of the property going into foreclosure.

To find out if you are eligible for rental or relocation assistance from Fannie Me, click here. Although Fannie Mae will allow you to sign a new month-to-month lease in order to keep people on the property, you should be aware that the property will be on the market, and that you would have to be willing to allow real estate agents to show the home.

If you’re living in a rental property that has undergone foreclosure, here’s wishing you the best as you and your family relocate.

Additional Resources:
Legal Assistance Resource Center

Young People Hardest Hit By Unemployment

I was astounded last week to read statistics that show that people ages 16-24 have been the hardest hit by unemployment during the recession. Although a slew of economists are claiming that the recession is over and we’re headed into recovery, the New York Post is reporting that:

The unemployment rate for young Americans has exploded to 52.2 percent — a post-World War II high, according to the Labor Dept. — meaning millions of Americans are staring at the likelihood that their lifetime earning potential will be diminished and, combined with the predicted slow economic recovery, their transition into productive members of society could be put on hold for an extended period of time.

And worse, without a clear economic recovery plan aimed at creating entry-level jobs, the odds of many of these young adults — aged 16 to 24, excluding students — getting a job and moving out of their parents’ houses are long. Young workers have been among the hardest hit during the current recession — in which a total of 9.5 million jobs have been lost.

Read the rest of this entry »

The Greater Economic Picture – how does it affect you?

As a child in the 1970s, I felt like I was living on the edge of a green pasture. The baby boomers were piled ahead of me and it was a time of profound economic growth. I walked past schools that were overflowing with portable units to manage the crowds, but by the time it came for me to enrol in them, they were closing down from the lack of enrolment. I realized that we live in a financial environment the way animals live in a habitat, and that it affects us on a very personal level.

Economic growth that happened during my toddlerhood had given way to inflation that marked my childhood, the way a big parade leaves a trail of garbage in its wake. When you’re tagging along at the tail end, you know there’s been a big party ahead of you, but all you cansee is litter and the clean up crews. It was a bit like growing up in the line up for an amusement park that had, just that minute, declared itself full to capacity and pulled the rope across the door just as you got to the front of the line.

I am the demographic leading edge of Gen X, and have found this has had a huge impact on me financially. As a child, I grew up in a sense of wealth and rising prospects, but also profound inflation and a confusion about what things were fundamentally worth. As a teen, I entered the workforce into an economy undergoing the flood of young adults into the labour market. Younger, and with less experience, I couldn’t find jobs. Anywhere. I spent my summers at the beach and couldn’t decide if I was lazy or lucky. I redirected back into school because I wanted to be a professor, but by the time I graduated from my B.A. there were already hiring freezes in universities across Canada. Read the rest of this entry »

Step aside housing crash, cupcakery is the next bubble

Daniel Gross at Slate magazine writes that the current recession (starting in late 2007) fueled the cupcake boom in America. He’s predicting the bubble is about to burst:

The cupcakeries are succeeding for a few reasons. They’re peddling a product that is simple, obvious, and generally affordable. Most of the new joints charge about $3 for a cupcake. And they’re certainly a useful rebuke to Starbucks, whose industrialized baked goods are barely edible…

In America, bubbles form because any good business idea gets funded a dozen times over. That’s the American way. Cupcakes are now showing every sign of going through the bubble cycle. The first-movers get buzz and revenues, gain critical mass, and start to expand rapidly. This inspires less-well-capitalized second- and third-movers, who believe there’s room enough for them, and encourages established firms in a related industry to jump in.

Aaron Gordon, a cupcake shop owner told the Washington Post:

“We are coming close to a bubble now. One or two more shops is about as much as the public can support. After that, the folks with the highest-quality cupcakes and best locations will be the ones who survive.” Read the rest of this entry »

Why do people spend money to store their stuff?

“You can’t take it with you but you can certainly find a place to stash it away.” – Tom Vanderbilt

I’m captivated by the self-storage industry. More notably, my business sense is boggled trying to understand the demand for it and why people waste money to store their stuff. Sure, there are good reasons… most are temporary like moving and you’re caught in between homes. With one in ten households renting a storage unit, the reasons for most have nothing to do with being in transition but rather choosing to store items we no longer need or want.

I’ve written about this before when I linked to this excellent article in Slate. But this weekend, The New York Times Magazine visited the self-storage self with fresh eyes noting that the “non-economic use” has been purged by the recession:

But the collapsing economy created an opportunity, and in some cases an ultimatum, for Americans to reassess the raft of obligations and the loads of stuff we accumulated before things went wrong. We’ve been making difficult decisions, and for a lot of us, that has involved rolling up the door of a storage unit and carting property in or out. The storage industry’s expansion in the first flush years of this decade was both enabled by, and helped enable, the extreme consumption that defined America then. The people coming through the gates now are defining who we will be when this turmoil is over. Read the rest of this entry »

Offense or Defense: How to Play the Current Market

Now I know this post will bore the hell out of some of you, but at this time of year it’s important to take stock – no pun intended – of how your investments are doing related to overall market, currency and commodity performances. Since it’s nearly September (in New York known as “get back to work time”), you’ll want to see which of your holdings have gone gangbusters and, perhaps, take a more offensive position, if you like risk, or a more defensive position to protect gains achieved in the last eight months.

Brad Sorensen, CFA, Director of Market and Sector Analysis, Schwab Center for Financial Research, wrote in a recent report that while the United States is showing signs of economic stability, even more positive signs are coming from companies abroad – especially emerging markets.

“As a result, we believe US investors can take advantage of this opportunity by shifting some assets into the more globally exposed sectors. As this story becomes more well-known, the trade can get played out, but we see signs that there is still further to run. Read the rest of this entry »

Cash For Clunkers Is A Lemon

What brought this train of thought about was Nina’s post and then Alex’s post on the “Cash For Clunkers” bill… and a bit of a rant too… sorry… but I really hate it when our elected idiots don’t think things through.

The idea is not even a good one… unless you’re a bank or love owing everyone and their brother money, living paycheck to paycheck… and I’m from a family that had new car dealerships for over 40 years and we’ve had a dealer license for over 50 so you think I would be in favor of it.

Beyond the quote “good” it does in the short term the costs down the road have not been looked at.

First and foremost it is being paid for with our children’s and grandchildren’s money… it will be clawed back in the form of higher taxes in the future.

Secondly it is a lot of fluff, smoke, and mirrors… a billion dollars seems like a lot but up against the scale of the auto industry in the US it’s NOTHING. Read the rest of this entry »

Cash-for-Clunkers is Working, Give the Gov’t Credit

There has been a lot of discussion, and spin, going on about the Cash-for-Clunkers program. And it’s unfortunate that the only “journalist” who can cut through all the b.s. is John Stewart.

The program has been an unlikely success, both on the economic and environmental fronts, and Republicans won’t allow the government to show it can do what it’s supposed to do: govern. I had hoped President Obama’s election would thrust us into an era of politics where the government was seen as a partner to citizens, who ultimately are the shareholders in such a vast organization. That hasn’t happened…yet.

Here’s what’s really going on with the Cash-for-Clunkers program.

Economists and policy makers under-estimated the attractiveness of the scheme. Other countries have already introduced such a program and seen positive results. Germany was among the first to put forward such an exchange and its auto sales rose by nearly a quarter year-over-year. Auto sales rose on a year-over-year basis in France, Italy and South Korea in July as their programs showed they were viable, while Japan and Spain reported smaller declines in sales. Read the rest of this entry »

Is the “cash for clunkers” program suspended or not?

There’s been a lot of press lately about the “cash for clunkers” program, formally known as the Car Allowance Rebate System, a $1 billion government program that helps consumers purchase a more environmentally-friendly vehicle from a participating dealer when they trade in a less fuel-efficient car or truck. Consumers receive a discount up to $4,500 from the dealership when they make the trade.

The program officially started on July 1, 2009, but claims didn’t get processed until July 24, 2009… hence the buzz in the media.

Yesterday, The USA Today reported the government was putting the brakes on the program:

The government suspended the explosively popular “cash for clunkers” program, fearing it would go broke before it could pay what it still owes dealers for a huge backlog of sales, according to congressional offices and a dealer group.

Suspension of the program was confirmed by Bailey Wood, legislative director for the National Automobile Dealers Association (NADA), which had been called Thursday night by the National Highway Traffic Safety Administration, which administers the program. Rep. Candice Miller, R-Mich., confirmed as well, saying she had been told by congressional leaders. Read the rest of this entry »

Freelancers: Are you experiencing a Self-Employed Depression?

The phenomenon of a Self-Employed Depression was written about recently in The New York Times Magazine. Emily Bazelon coined the term as she described the effects of the recession on solo practitioners in NYC. In the current economy, she asks the question, “What happened to all those liberated, self-reliant, self-branded free agents?”

Bazelon’s story focused on one yoga instructor who sent her an email message that said, “I don’t know how I will make it through the summer.” The bottom of the note read, “Sent from my iPhone.”

The call of semidesperation via a high-tech status symbol is an emblem of the gap between the past and the present for many of urban America’s self-employed. Freelancers still have the trappings of middle-class entrepreneurship. But the downturn is eating away at their livelihoods and the identity they thought they chose when they decided to work for themselves.

Livelihood and identity often go hand-in-hand. According to the Bureau of Labor Statistics, the estimated amount of self-employed workers in the US was 9 million in 2005. And now with corporate layoffs and out of work professionals adopting the freelance mindset, it’s likely that the self-employed pool of workers is deeper than it was even a few years ago. That’s a lot of self-employed competition. Read the rest of this entry »