Rent it Right

Q: I'm a renter and have just learned that my home is being foreclosed. My landlord thinks the bank will evict me, because my lease began after he used the property as collateral for his mortgage (which he's defaulted on). Is there any way I can stay? I've always paid the rent and been a good tenant. --Sam S.

A: As your landlord explained, when a lease is younger than the loan that's secured by the property, and the borrower defaults, under the normal rules of the game, the lease is wiped out. Of course, the bank that now owns the property can choose to become a landlord and let tenants stay, but the majority of banks do not want anything to do with property management. They also believe that empty properties are easier to sell, despite the overwhelming evidence that a neighborhood full of empty (and possibly vandalized) foreclosed homes will mean that those homes will drop in value, thus making any sale less profitable.

There may, however, be a way for you to stay, depending on who owns the landlord's mortgage. In December 2008, Fannie Mae, the large buyer of home mortgages and loans, announced that it would allow rent-paying tenants to remain in foreclosed properties as month-to-month tenants. This is a huge development, and it remains to be seen how these bankers and number crunchers, many of whom don't know a sublet from an assignment (let alone a pipe wrench from a crescent wrench), will fare as property managers. Let's hope they do some homework and consider hiring trained property managers to handle this new division of their company.