Q: I just moved into a house I’m renting, and I think my landlord is in foreclosure. I’ve only been there three months, but all this mail is coming from her mortgage company — much more than just a monthly statement. Just last week, the bank sent certified letters, too, and we’ve started to get letters from a trustee company, although we haven’t opened any of them because they are addressed to the owner.
She’s never changed her address to wherever she’s living now, and when I ask her about it, she denies that she’s in foreclosure and just says the bank made a mistake. My wife and I both work in the real estate industry, so we know the drill and we feel like the landlady is insulting our intelligence — we were trying to offer to help her catch up, but we’re starting to suspect that this might have been her plan all along.
If she’s not making the mortgage payment, I don’t feel like I should have to pay her — especially if we’re going to end up evicted after the foreclosure anyway and have to move all over again. How could this have been avoided? Should I stop paying her?
A: Remember "The First Wives Club"? I hear your fact pattern so often these days I’m going to suggest a new Jilted Tenants’ Club. It’s very unfortunate, but there are those property owners out there who either decide strategically to walk away from their homes or realize that they can no longer afford them and make a concerted (and corrupted) effort to move out while they can, stop paying the mortgage, put a tenant in there, and collect as much rent as they can before they lose the home.
I’ve seen it time and time again, and there are lots of ways to look at this. First off, you’re not 100 percent certain that this is the situation you’re in, but you do strongly suspect it — and for good reason. The frequent letters, certified letters and trustee letters are all the warning signs of an impending foreclosure.
While there are lots of online services that tout themselves as the way to check up on your prospective or current landlord to make sure they’re still in good graces with their lender, they all cost, and they vary widely in efficacy.
There is one free, sure-fire way to find out whether your landlord is actually in foreclosure, and that’s to go to your county recorder’s office in person and look on the public records for your address. You’re looking to see whether any preforeclosure notices, like a notice of default (NOD) or a notice of trustee sale (NTS), have been recorded.
The downside is that by the time an NOD or NTS is recorded, the owner is already several months behind on the mortgage payment. Things might be very advanced and irreparable at that point. If I were you, I’d take a trip down to the recorder’s office and search for notices.
And while I was there, I’d also try to record my lease — that’s the one strategy you can use to put yourself on the foreclosure notice mailing list. (If you have a hard time with this, seek out a local escrow or title officer, who might be able to help you navigate the recording process.)
In an ideal world, though, you’d be able to persuade your landlord into honesty about her situation. Even finding a recorded notice does not necessarily mean she was planning to hang you out to dry, as many owners go late on their mortgages strategically in pursuit of a loan modification or short-sale approval by their lender.
Under the terms of your lease, you are required to pay rent or be subject to eviction. If you pay the rent, as you agreed to, not only can she not evict you before the foreclosure — depending on the situation, you might not be evicted afterward, either. If her loan is owned by Fannie Mae or Freddie Mac, or is an FHA-insured loan, you might be able to stay in the place — paying rent to the foreclosing lender — for quite a long time following a foreclosure.
If you live in a town with eviction controls, like many major urban areas, you might be able to stay in the home indefinitely, so long as you don’t give the foreclosing lender a good reason, or "just cause," to evict you. No matter what kind of loan or town you live in, many tenants field offers from their landlord’s former lender for moving expenses and other monies to move out, which is known as "cash for keys" by real estate insiders.
I know tenants who have stopped paying their rent and essentially called their landlord’s bluff. I know many others who haven’t, as they signed the lease and plan to live up to their obligations under it. Be aware that if you do stop paying the rent, and she brings an action to evict you, you should be prepared to either come up with the cash or be evicted — and that’s something no one wants on their credit report.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.
What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.