Foreclosures Also Put Renters At Risk

As increasing numbers of rental properties fall victim to the housing crisis, renters are finding themselves equally at risk as homeowners. Real estate data provider RealtyTrac reports that rental foreclosures have almost doubled since January in some cities, leaving thousands of tenants hanging.

According to the nonprofit Oregon Law Center, renters are often unaware of their risk for eviction and usually have no reason to expect it. There have been cases where renters had to be evicted prematurely, even if their leases were still good for several months.

Studies by the National Low-Income Housing Coalition show that about one-fifth of all foreclosed properties are occupied by renters. Some states have addressed the problem by proposing laws to protect renters in the event of foreclosure, but few have been actively pursued.

In Oregon, such a law is scheduled to take effect later this month. Under the law, tenants will be allowed to stay in foreclosed properties for the duration of the lease, or 90 days after the auction date if they are on month-to-month terms or if the buyer intends to use it as a primary residence. Renters also have the option of applying their deposit to their last few months of stay, provided they formally inform the owner of their intent to leave.

The law will also require foreclosing entities to inform both the landlord and the tenants as soon as the foreclosure process begins. To get protection, renters will have to submit a copy of their lease or rental agreement to the bank at least a month before the foreclosure date.

Prior to the law, tenants were only given 10 days to leave the property after the home is sold off. Experts say it is impossible for some renters to obtain the funds for moving, including the security deposits and utilities, in such a short time.

Check out the State Foreclosure Laws or talk to a loan modification specialist to discuss your case.