Additional Protection for Renters

In a bill recently passed by Congress and signed by President Obama renters with month-to-month rental agreement must be given 90 days notice before they can be evicted. Renters with leases are allowed to stay in foreclosed home until their lease expires.(unless the foreclosed property is sold to a bonafide purchaser.) You can find more information here.

In 2008 the California legislature passed Senate Bill 1137. That bill gave tenants who are affected by foreclosure and additional 30 days notice before they could be evicted. They now must be given 60 days. This law however is superceded by the more stringent 90-day federal rule.

Cash for Keys

Its foolish to be evicted from your foreclosed home. After defaulting on your mortgage, you've lived in your home rent free for a number of months. Prior to eviction, the bank will often offer to pay you to move out--this is known as "cash for keys." In exchange for your promise to leave the house in clean, undamaged condition, the bank will pay some of your expenses to move. Not all banks offer this--but its preferable to receive cash to move than to have the sheriff move you (also free--but the move only takes you to the sidewalk.)

The rest of this article reviews the actual eviction process.

Legal Eviction Procedures

After the gavel has struck at a trustee's sale you need to leave your home. The new owner can start legal eviction procedures, which can only take a matter of days.

After a judicial foreclosure you cannot be evicted during the redemption period. Redemption is discussed earlier.

If you don't leave your house after it sells at a trustee's sale, the lender can have the sheriff evict you through a process called "unlawful detainer."

The unlawful detainer process is the same used by a landlord to evict a tenant--you are now a holdover tenant in the lender's house.

Fannie Mae and Freddie Mac Procedures

Two of the largest guarantors of mortgages, Fannie Mae and Freddie Mac, announced changes to their policy towards rentals who are victims of foreclosure. The proposed plan is to let renters living in foreclosed houses to sign leases with Fannie or Freddie while the property is for sale. As a renter, you are allowed to either accept "cash for keys" or sign a new month to month rental agreement with Fannie Mae or Freddie Mac. They will not seek credit reports. Keep in mind, that you will either have to vacate the house when it is sold in foreclosure (or be evicted). You can find Fannie Mae's official policy at the bottom of this page (as a PDF attachment.)

Ask for time to move out

It does not hurt to ask for extra time to move out. If you have taken fairly good care of the house, the buyer may keep you on as a caretaker until the buyer's plans for the property can be finalized. If the buyer wants to remodel for instance, it could be several months before plans are approved. During that time the house will be vacant and an occupied house is less likely to be vandalized or have other problems.

What is a notice to quit?

The purchaser at a foreclosure sale must serve the occupants with a Notice to Quit before filing an eviction lawsuit to gain possession of the property.

If the occupant is the former owner or a tenant of the former owner, a 3-Day Notice to Quit is required. If the notice period expires and the occupants have not left, then the new owner may then file an unlawful detainer.

Even having an eviction lawsuit filed against you can damage your credit. It may be better to leave voluntarily than face eviction. You should talk to your legal advisor.