The Bailout Bill Helps Renters Keep Their Homes

Great news for renters facing eviction due to foreclosure: any mortgage owner seeking assistance under Congress’ mammoth bailout bill is required to let paying renters stay in their homes.

Let’s dive into the text and see what renter protections Congress cooked up:

SEC. 109. FORECLOSURE MITIGATION EFFORTS.

(b) Coordination- The Secretary shall coordinate with the Corporation, the Board (with respect to any mortgage or mortgage-backed securities or pool of securities held, owned, or controlled by or on behalf of a Federal reserve bank, as provided in section 110(a)(1)(C)), the Federal Housing Finance Agency, the Secretary of Housing and Urban Development, and other Federal Government entities that hold troubled assets to attempt to identify opportunities for the acquisition of classes of troubled assets that will improve the ability of the Secretary to improve the loan modification and restructuring process and, where permissible, to permit bona fide tenants who are current on their rent to remain in their homes under the terms of the lease. In the case of a mortgage on a residential rental property, the plan required under this section shall include protecting Federal, State, and local rental subsidies and protections, and ensuring any modification takes into account the need for operating funds to maintain decent and safe conditions at the property.

Renters are explicitly allowed to keep any legal rental subsidies, so even if grandma’s nine-room penthouse Park Avenue suite is foreclosed, she can keep her rent-controlled rate of $32 per month.

SEC. 110. ASSISTANCE TO HOMEOWNERS.

(b) Homeowner Assistance by Agencies-

(3) TENANT PROTECTIONS- In the case of mortgages on residential rental properties, modifications made under paragraph (1) shall ensure–

(A) the continuation of any existing Federal, State, and local rental subsidies and protections; and
(B) that modifications take into account the need for operating funds to maintain decent and safe conditions at the property.

The bailout bill is full of goodies to help keep people stay in their homes. If you’re facing eviction, read our post explaining the bailout bill, and then immediately call your local HUD office to discuss your options.

Text of H.R. 1424: Emergency Economic Stabilization Act of 2008 [GovTrack]
PREVIOUSLY: Chicago Sheriff Halts Foreclosure Evictions, Won’t Toss Innocent Renters
What Does The Bailout Mean For You?
(Photo: Getty)

Comments

Edit Your Comment

  1. Fujikopez says:

    When does this go into effect? Now?

  2. That is awesome. Someone tell that Chicago Sheriff!

  3. OletheaEurystheus says:

    NOW, this sheds some light on things a bit. If banks knew this, then maybe the reason they are so adamant in getting renters out, is because when they finally take the money, they wont be able to kick renters out. So get the renters out now THEN take the money.

    Maybe a little bit conspiracy theorish, but it wouldnt surprise me at this point.

    • @OletheaEurystheus: oh oh oh… I have finally had to admit in the last several months that I am a big time conspiracy theorist. I never imagined I could be one of those, but sometimes things just add up the way they add up. Now I see it everywhere…

      • OletheaEurystheus says:

        @alphafemale: Well it just seems strange that over the last two weeks, foreclosure notices have rose by a large amount and there has been a big push from the banking industry to streamline it even more where there is absolutely NO ONE buying even if they did get people out.

  4. What gets me is that this bit of the bailout bill should have been shouted from the rooftops on the day the bill was signed. But no, I suppose the lenders in question wouldn’t want people to know they had any recourse. I wonder how many people who could have been helped by this knowledge were put out of there homes in the last week or so.

    Perhaps if citizens heard things like this, about the protections and benefits the common man will get from the bailout, maybe it would stop a lot of the panicking that we’ve been seeing the last few days.

  5. Echomatrix says:

    why wouldn’t they want them to stay? That’s what always got me. They are paying REAL money. banks should like it too

    • OletheaEurystheus says:

      @Echomatrix: As has been said elsewhere, there are 2 reasons why banks would not want renters.

      1) it means the banks actually have to spend money on upkeep and not make nearly the profit they could from a sale.

      2) the banks are really THAT stupid to think anyone would be moronic enough to buy a house in this market. While I am sure there are a few, the likelyhood is slim.

      • madanthony says:

        @OletheaEurystheus:

        I think #1 makes sense, and I don’t think there is anything wrong with that. First of all, I’m guessing that the kind of people who have their house foreclosed on probably haven’t kept up with maintenance, so the bank as landlord probably would have a bunch of liability by becoming landlords. Plus, lots of unsuccessful flippers rented at below-market rates just so they would have money coming in, so the bank probably would lose out by keeping those renters.

        I’m not an accountant, but I’m also guessing there are probably some balance sheet advantages to liquidating bad debt, even if it means selling at a large loss, compared to carrying a bunch of rental properties on the books.

  6. squablow says:

    When the rented homes go into forclosure, do the renters then start making payments to the bank? Or does the money continue to get paid to the previous owner.

    At that point, the renters are basically just renting from the bank instead of a private party. Is that right?

  7. Brontide says:

    Since many of these were investment properties, often the tennant is paying a fraction of the true cost of holding the mortgage… so they are going to allow tens of thousands of dollars to be flushed away? What if a person rents their, soon to foreclose, property to their wife for ten years and a moderate but not impossible payment? Does this force the bank to not evict them?

    I’m just thinking that something like this could very easily be gamed ( not unlike the entire bill it seems ).

  8. rugman11 says:

    I gotta say, I don’t like this at all. What’s to stop my brother from buying the biggest house he can get a loan for, making three months worth of payments, signing me up for a 30-year lease at about half the market value, then letting the home go into foreclosure. Now I get to stay in an awesome home for the next 30-years at a 50% discount.

    Also, isn’t this a massive violation of property rights? If the house is foreclosed on, then it belongs to the bank. What right does the government have to tell a bank what to do with its property rights?

    • OletheaEurystheus says:

      @rugman11: The right they get when taxpayer money is bailing out the bank. For all purposes once these banks take money, they are taxpayer owned so we can tell them to do whatever we like through our legislature.

    • wickedpixel says:

      @rugman11: It sounds like this only applies while the bank is holding the property. Once they sell it to someone else these restrictions wouldn’t apply to the new owner.

  9. zolielo says:

    I bet that if the house is not Decent, Safe, and Sanity they tenant will be out, ASAP.

    Also 90, 60, or 30 day notices should still get tenants out. Whatever… Order of Possession, Possession in Use, Unlawful Detainer, etc…

    Plus generally when the government takes over a property they have the tenants sign a new rental agreement with them. If not it is a Pay or Quit situation.

    Looks like they are going to regulate under the Housing Act (24 CFR). I would have gone with Uniform Relocation Assistance and Real Property Acquisition Policies Act (49 CFR). Believe it or not the DOT has more practice at overseeing single family residences than HUD. But I will be calling a few pals at HUD to see learn more. Interesting stuff.

  10. jenniferrose76 says:

    my ex-husband was renting a house a few months ago. the bank told him they were putting it up for auction, and he could stay but they were going to need him out immediately if a sale went through, so he found a new apartment. fortunately the person renting to him was ethical and put his security deposit in escrow, so he was able to get that.

    and it is quite shady to me that this little nugget of this bill hasn’t gotten more press. how many people would have been able to stay in their rental properties, and not had to go through a surprise eviction? and likely without their security deposit? i know that when i was renting from someone who went through bankruptcy/foreclosure, it took AGES for us to get our deposit back. fortunately this was before we had kids (and back when apartments were $400 a month) so we were able to pull a security deposit together relatively quickly.

  11. Observer2121 says:

    Wow so the “investors” who bought these homes just to flip them but now have to rent them get saved and I get to keep renting….what a deal. Home prices need to drop just like the stock market has only then will we get real buyers returning to the market. Homes are still not affordable to the average person.

  12. Erwos says:

    I think some folks are missing the key problems with forcing the bank to be a landlord:
    1. The bank needs to go into the management business – repairs, billing, etc. This could cause them to lose even more money.
    2. It makes foreclosed houses take even longer to sell.
    3. It makes them _harder_ to sell. Ever tried to view a house with hostile renters in it? Not an experience I want to repeat.

    I don’t have any problems with a 30-day notice, or even forcing the bank to pick up moving expenses (up to some value of the house/loan), but be careful what you wish for.