Foreclosure Article


WHAT IF I RENT A HOUSE THAT'S IN FORECLOSURE - The Protecting Tenants at Foreclosure Act

 The Protecting Tenants at Foreclosure Act

This law expired on December 31, 2014

 

IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014. While there were some attempts in the House to revive this law in 2015 none have been successful. Arizona State Law, A.R.S § 33-1331, gives tenants of foreclosed properties some limited protections; information about these protections can be found in this article. This article remains on AZLawHelp.org purely for historical value for those interested in how the Protecting Tenants at Foreclosure Act operated from 2009 through 2014.

There are legal protections for tenants renting a house that is in or goes into foreclosure. The Protecting Tenants at Foreclosure Act (PTFA) was passed by Congress signed into law by the President Obama in 2009; subsequently the law was extended in 2010. The PTFA expired on December 31, 2014. The PTFA, depending on the facts in a particular situation, requires that renters in foreclosed homes be allowed to stay or given sufficient notice under the law.

  

Who qualifies for protection under the PTFA?

The tenant protection provisions apply in the case of any foreclosure on a “federally related mortgage loan” or on any dwelling or residential real property. The tenant must also be “bona fide.” A lease or tenancy is “bona fide” only if:

  1. The mortgagor or a child, spouse, or parent of the mortgagor under the contract is not the tenant;

  2. The lease or tenancy was the product of an arm’s-length transaction; and

  3. The lease or tenancy requires the receipt of rent that is not substantially less than fair market rent or the rent is reduced or subsidized due to a federal, state, or local subsidy.

In other words the lease must be made with another person and not with oneself and the rent payments must be a fair amount for the property that is not supplemented by the government.

  

When do renters in foreclosed homes get to stay and when do they have to leave?

Renters Get to Stay IF:

Renters get to stay for the duration of the lease, if all of the following requirements are met:

  1. There is a valid lease (not the end of the lease term),

  2. The lease was signed before receiving notice of foreclosure (whether judicial foreclosure or trustee sale), and

  3. The new owner does not intend to occupy the property as a primary residence.

Renters Cannot Stay But Must Be Given Notice IF:

In most other situations, the renters will have to leave, once the foreclosure is complete, and upon receiving 90 days notice from the new owner. The common situations where a renter will have to vacate after the foreclosure upon receiving notice are:

  • Renters must vacate if there is a valid lease and they had notice of foreclosure before signing the lease; or

  • Renters must vacate if there is a valid lease, and even if there was no notice of foreclosure but the new owner intends to occupy the property as a primary residence; or

  • Renters must vacate if there is no valid lease, including where a lease expires and the renter is paying month-to-month. 

Why does the law end December 31, 2014?

The law has what is called a sunset provision, meaning it has an expiration date. The original date was extended in the “Dodd-Frank Wall Street Reform and Consumer Protection Act”, so that the law will be repealed on December 31. 2014. When laws are written, the legislative body writing the law may set a date of when that law will end, referred to as a “sunset” clause or provision (Note: Not all laws have sunset provisions, it is not required). The PTFA is a federal law, Congress would have to authorize and extension or make the law permanent and the President would have to sign it into law.

 

 

Source:  See 12 U.S.C. 5220 or search the US Code online with the US House of Representatives website. For additional information see the Consumer Financial Protection Bureau website.


Comments:

QUESTIONS

  • My father passed away in September, 2016. I am the executor of his estate and I have a lawyer representing me and the estate. His house is paid off but he has a 7,000 home equity line of credit. There is no money in the estate to pay any bills except the utilities. It is for sale and hopefully will be sold soon. I received an Act 91 notice. Can a house be foreclosed on that is in probate? There is no money to pay the home equity line of credit bill or the taxes owed till the house is sold
  • How can I legally kick out family members? I own home they have been staying with more for over a year. Some occasionally contribute to rent but mostly don't. I have asked severe times in past 6 months to love out now I have given a 2 month telling them by September 1st but doesn't look like ahyones making plans and just freeloading and being lazy and I can't take it anymore Mom brother, sister . How do I legally get them to leave ?
  • I asked CitiMortgage Inc . for a loan modification at the end of 2012 because my ci-borrower was gone and I was going to get a 20% paycut two months from when I made my request. I was definitely in imminent danger of default. They said call back after I miss 3 payments and then they would help.Endless paperwork, 10 payments behind-I reinstated in full and am now current. They transferred deed to trustee and still foreclosure activity. Help
  • I am curious about the 90 day requirement to file a lawsuit for a deficiency on a foreclosed home. In my case, I had a purchase money loan and a second mortgage from the same lender. After the foreclosure, the lender has continued to keep the second mortgage in an "open" status. Is the lender barred from suing on the second mortgage past 90 days of foreclosure or do they have up to the 6 year AZ statute of limitations to sue?
  • my dad took out home loan in 2004 died 2007 never told mortage co i just kept paying the payment but fell behind on 2 payments mortage co wants 3000 or foreclose can they do that
  • Bankruptcy was done 6/2010.My mortgage was included and at same time GMAC mortgage was going thru bankruptcy and Ocwen took over my payments which I continued to make. I was not aware that I was to reassume my loan nor advised by Ocwen or lawyer on this. Ocwen took payments and stopped reporting to credit bureau's.Tried Harp but was unable due to no show of a morgage.Struggling to pay 1400mo now.If let go can they report it with lack of show of mortgage.Can they be forced to report back paymt's.what options do I have before I'm forced out of home.Reach me at [email protected]
  • Should I be held responsible for the HELOC on my house held by a different bank than my first mortgage that was foreclosed upon?
  • My family and I had moved into our new home after paying six months in advance and signing our lease . One and half months into being our home , the sheriffs arrived at our door saying that they had put warning's on our house, though we never saw any . Conveniently, our landlord was nowhere to be found . What agency will help us get into A home and help with a couple month's rent?
  • As a renter in a property that is going up for sale on 4-22-08, how long do I have to move and find a place to live? The owner will not return my phone calls or my money?
  • How long can my tenant stay at property when letting home forclose?

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