Nearly 40 Percent of California Foreclosures Were Rentals

May 18, 2010 No Comments »

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Of the estimated 211,154 residential units foreclosed on in California during 2009, roughly 77,145 were rental units, according to a new report focused on tenant rights.

The foreclosures resulted in the displacement of an estimated 208,795 tenants who were living in single-family homes, condos, and multi-family apartments, despite likely making on-time mortgage payments every month.

From 2008 to 2009, there was a 70 percent increase in the foreclosure rate of apartment buildings of five units or more – single-family foreclosures fell 3.1 percent year-to-year.

An overwhelming 85 percent of the foreclosed properties went back to banks and mortgage lenders in 2009, while private investors took the rest.

During the year, banks forfeited more than $776 million in rental income, focusing on booting tenants by hiring lawyers to litigate eviction cases and having real estate agents carry out cash-for-keys deals.

“Once the properties are vacated, they become prime targets for vandalism, further contributing to plunging property values, and creating legal liability for banks as the owners of blighted vacant property,” the Tenants Together report said.

“Furthermore, banks continue to tarnish their standing in local communities by maintaining their policies to evict rent- paying tenants.”

Fannie Mae and Freddie Mac have implemented post-foreclosure programs to assist renters, but many banks apparently continue to see tenants as obstacles to future profits.

Tenants Together is calling for better tenant protections, including making the “Protecting Tenants at Foreclosure Act” (PTFA) permanent, passing local “just cause for eviction” laws, providing tenant notification when a landlord receives a foreclosure filing, and boosting legal funding for tenants in foreclosure situations.

Currently, PTFA provides tenants with the right to a 90-day notice to vacate after foreclosure and requires new owners to allow tenants with leases to continue occupying properties until the end of the lease term, unless sold to a buyer who intends to occupy the property as their primary residence.

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