Tenants Facing Foreclosure Protected by New Federal Law
Published On: September 2, 2018
On May 24, 2018 a permanent extension of the “Protecting Tenants at Foreclosure Act” (PTFA) was signed into federal law. The PTFA enables renters whose homes were in foreclosure to remain in their homes for at least 90 days or for the term of their lease, whichever is greater.
The PTFA, enacted in 2009 and originally expired at the end of 2014, was the only federal protection for renters living in foreclosed properties. During the financial crisis, bad faith and fraudulent lending, coupled with falling home prices and high unemployment, resulted in an astronomical high number of foreclosures in the U.S.
Renters lose their homes when the owner of the home they are renting goes into foreclosure.
The impact of these foreclosures was not limited to homeowners, however; renters lose their homes every day when the owner of the home they are renting goes into foreclosure. Unlike homeowners who know that a foreclosure is coming, renters are completely unaware. Yet, they continued to pay rent while the homeowner was not paying their lenders. Many renters can be evicted within a few days of the completion of the foreclosure.
The PTFA gives most renters at least to 90 days’ notice before being required to move after a foreclosure.
Under PTFA, tenants with Section 8 housing choice voucher assistance have additional protections allowing them to retain their Section 8 lease and requiring the successor-in-interest to assume the housing assistance payment contract associated with that lease.
The law applies in cases of both judicial and nonjudicial foreclosures.
The PTFA applies to all foreclosures on all residential properties; traditional one-unit single family homes are covered, as are multi-unit properties. Tenants with lease rights of any kind, including month-to-month leases or leases terminable at will, are protected as long as the tenancy is in effect as of the date of the completion of the foreclosure.
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