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Home Foreclosures: 10.8.1.4 Fannie Mae and Freddie Mac Mortgages

Both Freddie Mac and Fannie Mae have announced programs to rent foreclosed properties. Fannie Mae may offer existing tenants month to month or term leases at market rate rent.607 Certain tenants may have a right under state law to remain in their home under the current lease.

Home Foreclosures: 10.8.1.5 FHA-Insured Mortgages

After foreclosure of an FHA-insured mortgage, HUD has the discretion to accept conveyance of a property occupied by a tenant or former homeowner.611 Though HUD generally discourages an occupied conveyance of the property, a tenant or former homeowner may be allowed to temporarily reside in the property if they sign a month-to-month lease and pay the fair market rent, as determined by HUD.612 An individual occupying the property may qualify based on a temporary, permanent, or long-term illness or

Home Foreclosures: 10.8.2.1 Overview

Before enactment of the Protecting Tenants at Foreclosure Act (PTFA), tenants relied on a variety of state and local laws to shield them from eviction. During the COVID-19 pandemic, state, local governments, and courts adopted a number of emergency measures to protect tenants from displacement. The measures suspended evictions, including post-foreclosure evictions of all tenants or tenants who suffered a hardship related to COVID-19 that led to a loss of income.

Home Foreclosures: 10.8.2.2. The Significance of When the Lease Commenced

The two key predictors under state law as to whether a tenant has rights to remain in the foreclosed property are whether the lease was executed before or after the mortgage and whether a foreclosure is judicial or non-judicial.630 If a lease was consummated prior to creation of the mortgage, the lease generally is treated as not extinguished by the foreclosure, in both judicial and non-judicial foreclosure states.631 This is so because the foreclosure purchaser acquires no greater interest than

Home Foreclosures: 10.8.2.3 State “Good Cause” Eviction Statutes

A few states and localities have enacted statutory provisions which limit the grounds on which tenants may be evicted, notwithstanding the expiration of the tenant’s lease.641 These statutes are referred to as “good cause” eviction statutes. Absent a good cause eviction statute, a tenant can generally be evicted for any reason or no reason. The only restrictions are those contained in the lease. Typically, permissible reasons for eviction include failure to pay rent, breach of a lease, or the commission of an illegal act in the rental unit.

Home Foreclosures: 10.8.2.4.1 In general

The legal rights of tenants occupying foreclosed properties are traditionally governed by state and local laws. The permanent extension of the federal Protecting Tenants at Foreclosure Act (PTFA) in May 2018, has provided a nationwide floor for such protections. State and local laws remain a critical source of protection for tenants after foreclosure as many of these laws secure greater protections for tenants than those outlined in the federal PTFA.651 Some of the most important protections are summarized below.

Home Foreclosures: 10.8.2.4.4 Disclosure of foreclosure to prospective tenants

Many homeowners facing foreclosure rent out their homes to supplement their income and help them qualify for a loan modification. But when loan modification efforts fail and the foreclosure process begins, the tenants find themselves facing eviction and, potentially, the loss of the last month’s rent and security deposit. Some states and municipalities enacted legislation to protect these tenants by requiring the homeowner to disclose any pending foreclosure to prospective tenants.

Home Foreclosures: 10.8.2.4.5 Utility shutoffs

When a landlord stops paying the mortgage, utility payments are frequently discontinued, leading to utility shutoffs during the foreclosure process and/or after a foreclosure sale. California,697 Maine,698 and Minnesota699 enacted legislation to provide tenants notice of an impending shutoff and to allow tenants to transfer the utility accounts to the tenants’ name without requiring the payment of arrearages.

Home Foreclosures: 10.8.2.4.6 Security deposits

Because a tenant pays their security deposits to the former landlord at lease origination, and not to the purchaser at foreclosure, security deposits are often not returned, making a tenant’s transition to alternative housing after foreclosure much more difficult. States have addressed this problem in a variety of ways. California702 expressly holds the purchaser liable for the return of the security deposit, even if the purchaser never received the deposit.

Home Foreclosures: 10.8.2.4.7 Sealing eviction records

Securing new housing is often difficult, but quickly locating a rental home or apartment with an eviction on your record can be almost impossible.705 States such as California,706 Illinois,707 New York,708 and Minnesota709 recognized that tenants evicted because of foreclosure are not at fault, and that their evictions should not prevent or hinder these

Home Foreclosures: 10.8.2.4.8 “Cash-for-keys”

Because of notice to quit periods, tenants often feel coerced to accept “cash-for-keys” offers, even when the offer does not include the tenants’ security deposit or moving expenses. Chicago and Connecticut have moved to regulate “cash-for-keys” offers.

Home Foreclosures: 10.8.2.5 Redemption or Purchase by Group of Tenants

In certain states, tenants also have the right to redeem the property by paying the mortgage debt prior to the foreclosure or by paying the foreclosure sale price after the sale when state law provides a statutory right of redemption.712 While this right may appear at first to be of little value to most tenants, a group of tenants working together with a community group or government housing agency may be able to use the redemption right as a means to obtain mortgage financing to purchase the property.

Home Foreclosures: 10.8.3 Rights of Tenants If Their Landlord Files Bankruptcy

In many cases involving foreclosure on a landlord, the landlord files bankruptcy in an effort to retain the property. Most such cases are filed under chapter 7 or 11. Residential property may be transferred away from the current landlord during or immediately after the bankruptcy process. In some situations, the transfer will be voluntary and in others required by the court.

Home Foreclosures: 5.5.2.6 The Consequences of Noncompliance

Most courts require strict compliance with statutory and contractual requirements for notices that must precede a foreclosure.249 This is particularly true for non-judicial foreclosures, where the lack of oversight heightens the importance of all procedural protections available to borrowers.250 Lack of compliance with notice requirements can be a basis to enjoin a pending non-judicial sale or prevent entry of a judgment of foreclosure.251 When ser

Truth in Lending: 5.15.2.1.1 General requirements

When a creditor renegotiates the debt on a loan, the TILA definition of a refinancing comes into play. Only if the renegotiation meets the TILA definition of a refinancing will the creditor be required to provide TILA disclosures. New transactions, with a different creditor, require new disclosures.1544 But when the original creditor modifies or refinances a loan, new disclosures are only required if the transaction meets the parameters of section 1026.20(a) of Regulation Z.

Truth in Lending: 5.15.9.1 General Rule

Like refinancings, assumptions represent a modification of the original credit obligation. Unlike refinancings (which by definition must involve the same consumer and the same creditor as the original transaction), assumptions involve a new consumer who essentially takes over a credit obligation from the original consumer. The classic example of an assumption arises when a consumer sells his or her home. The purchaser, instead of obtaining a new mortgage, may “assume” the payments on the seller’s mortgage.

Truth in Lending: 5.13.2.1 Coverage

For any consumer credit ARM (including open-end credit) secured by the consumer’s dwelling and entered into after December 9, 1987, in which the interest rate may increase after consummation, Regulation Z requires creditors to disclose the maximum interest rate that may be imposed during the term of the obligation.1264 This change in Regulation Z implements the Competitive Equality Banking Act of 1987,1265 which provides that “[a]ny adjustable rate mortgage loan . . .

Truth in Lending: 5.15.1 General Rule

Generally, events occurring subsequent to the delivery of the required disclosures that render the original disclosures inaccurate do not violate the Act.1537 This rule is based upon certain assumptions.

Truth in Lending: 9.8.2.1 Introduction

The calculation of points and fees under the Dodd-Frank Act discussed in this section is used both to determine whether a loan is a “high-cost” loan under HOEPA and whether the loan meets the definition of a qualified mortgage.