New requirements for tenants who live in foreclosed properties that were financed with government-insured loans go into effect in three months.
The Protecting Tenants at Foreclosure Act of 2009 was signed into law on May 20, 2009. The law requires mortgagees on foreclosed properties that were financed with Federal Housing Administration mortgages to provide occupants of the properties with 90 days’ notice before evicting them.
Mortgagees need to ascertain who occupies the property before completing a foreclosure. The occupants’ rights for continued occupancy need to be determined.
The mortgagee must follow the Department of Housing and Urban Development’s occupied conveyance procedures by sending the Notice to Occupant of Pending Acquisition between 60 and 90 days before the mortgagee expects to foreclose. The notice needs to be sent by certified mail and summarize the conditions under which continued occupancy will be considered.
Tenants who are in a bona fide lease can continue to occupy the home for the term of the lease “except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence.”
Once a tenancy protection expires, mortgagees need to move quickly to take possession of the property.
“HUD expects mortgagees to attempt to collect rents payable under bona fide leases and tenancies and, in the event of default, to take possessory action pursuant to the rental contract terms and applicable law,” the bulletin states. “Any rents received by a mortgagee during the term of the bona fide lease or tenancy must be reflected as a credit on line 115 of Form HUD-27011, Single-Family Application for Insurance Benefits.”
The updated requirements, which supersede the Federal Register Notice published on Oct. 28, 2010, go into effect on July 1, while the act sunsets on Dec. 31, 2014.
