You're paying your bills, but your landlord isn't. And you're the one holding the eviction notice.
This is becoming an all too familiar scenario for thousands of renters nationwide who have become the unintended victims of foreclosures. Banks are booting good tenants onto the streets with little to no notice after seizing a property from a delinquent owner, ignoring tenant leases.
In the most troubling cases, some families are forced into shelters for temporary housing because they have little savings to cover moving costs, first month's rent and a security deposit at another apartment.
Fannie Mae this month pledged to change that with its new renter policy starting in January. The plan will allow renters living in foreclosed properties to sign new leases with Fannie while the property is up for sale, or give the tenants money to relocate. Fannie has yet to establish the length of the leases, and the amount of move-out assistance will vary by state and property.
Freddie Mac says it will unveil a similar program in a few weeks.
But how does a renter know if his landlord has a Fannie- or Freddie-held mortgage? Worse yet, what about renters of landlords who don't?
Fannie plans to reach out to tenants, says company spokesman Brian Faith.
"Most tenants don't normally know the details of their landlord's mortgage arrangements, but we'll be contacting the tenants in foreclosed properties we own to make them aware of the option to stay in their home through a lease with Fannie Mae," he said in an e-mail.
The details of Freddie's tenant plan are still unavailable.
The pair own or guarantee about half of the $11.5 trillion in U.S. outstanding home loan debt. Fannie estimates about 4,000 tenants live in the company's foreclosed properties and would be eligible for the plan.
Unfortunately, that's just a fraction of renters facing the consequences of a landlord's foreclosure. Renters in large complexes are likely safe because multifamily loan delinquencies are still very low. But 15 million renters, or about 40 percent of all renters, live in single-family homes, many of which are owned by mom-and-pop investor landlords. This is where the risk lies.
What should you do if you receive a foreclosure or eviction notice?
"Don't panic or stick your head in the sand. Neither action will be helpful," says Robert Baker, education coordinator at Housing and Credit Counseling Inc. in Kansas.
Call the sheriff's department first, Baker says. Find out how long the foreclosure process takes. Is it 60 days or 90 days? Then you'll have a timeline to work with and time to prepare for the worst-case scenario.
Next, get on the Internet. Find out the rental laws in your state. Some states, including California and Illinois, have recently passed legislation giving renters a grace period, ranging from 30 days and up, to stay in a property after it's been sold in foreclosure. Others are considering similar legislation.
The U.S. Department of Housing and Urban Development outlines tenant rights by state on its web site.
The lender's name or its lawyer will be on the eviction notice. Contact either one to let them know you're in the property. Find out what your options are. Will the lender let you sign a new lease or is the bank offering some cash assistance for moving out? Don't let the lender bully you into moving out sooner than stated by law.
If you're nervous negotiating with the lender on your own, contact a local nonprofit housing counseling agency for help. HUD's web site lists agencies by state or you can call its toll-free number 1-800-569-4287.
Tenant rights lawyers are few and far between and can be expensive, Baker says. And unfortunately, legal aid offices around the country are facing severe budget cuts, says Amy Marx, an attorney at New Haven Legal Assistance Association Inc. in Connecticut.
Her office only has enough staff to help those renters whose landlords have a Fannie- or Freddie-held mortgage. The others, she says, they have to turn away.
"I hate to say it, but we just don't have the resources," she says.
You can also do a little digging into your landlord's financial situation if you're worried about a possible foreclosure. Go to the county courthouse or its web site and do a rudimentary background check on your landlord. District court records or the county recorder's office will show if any foreclosure actions or judgments have been filed against your landlord. Are there any other records showing financial distress like past or present bankruptcy filings? These can be telltale signs of a landlord strapped for cash, Baker says.
Also, call your local Better Business Bureau to see if there have been any complaints against your landlord. This can be a clue that something isn't right.
Last, has the condition of your rental property suddenly deteriorated because of neglect? If the landlord isn't making repairs, maybe it's because he can't pay for them or doesn't want to spend money on a property he's about to lose.
In the meantime, save your money for a rainy, forced-out-of-my-home fund.