Home Renters Beware: The Foreclosure Crisis Affects You as Well

By Sheryl Landrum
Home Worth Columnist

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The foreclosure crisis has been tragic for homeowners who have been unable to keep up with higher interest rates, declining home values, and lenders who have been unable or unwilling to help them renegotiate their home loans. However, homeowners have not been the only ones affected by this crisis; renters have as well.

Renters Beware: You Can Lose Your Home to Foreclosure
Those buying their residences or refinancing homes with adjustable rate mortgages weren't the only ones who got into trouble with their mortgages; investors did as well. Unfortunately, when people have difficulty making mortgage payments, they stop making payments on investment property first. What do you need to know as a tenant and how can you protect yourself from losing your home?  

Tips & Property Rights for House Renters
It truly is a new world when it comes to housing. In order to prevent getting behind the eight ball as a renter, protect yourself from your landlord's home foreclosure.  

• Before signing that lease, ask for proof that the obligations on the mortgage are current. If you don't want to ask the owner, talk to a title officer or real estate professional and ask them if they can check the mortgage status for you.
• Ask the owner if your security deposit will be held in trust or in a separate account from the rent you pay.
• You may consider renting through a property management company versus a private owner to add a layer of protection against losing your house to foreclosure proceedings. Property management companies are required by law to hold deposits in trust making it easier to get deposit money back if a problem arises.

What Are Your Rights as a Renter?

• A Notice to Residents of Impending Sale. This is provided by the foreclosing agency and will advise you that a new owner will either provide you with a 60 day notice to vacate or ask if you would like to continue to rent or lease.
• A 60-Day Notice to Move. Once the house has been sold, the new homeowner is required by law to provide you with a written notice giving you 60 days to move.
• Remember, as a renter of a foreclosed property you are still obligated to pay your rent. Failure to do so can adversely affect your credit and cause other legal problems as well.

Tenants are often unseen victims of the current mortgage crisis. Protect yourself if you are choosing to rent a home and remember that this mortgage crisis has an upside as well. Many renters are now finding home buying within reach. Talk to a professional real estate agent and see if you too may make the transition from renter to homeowner.

Source: The San Diego Union Tribune, Sunday, July 27, 2008, Tenant Beware: You Could Lose the Home You Rent Due to Foreclosure, by Neil Fjellestad  


About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage of San Diego at the Prudential Realty Office in Bonsall, California.