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, 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 has pledged to change that with its new renter policy starting this month. 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 move. 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 said it would unveil a similar program in a few weeks.
But how does a renter know if his landlord has a mortgage held by Fannie Mae or Freddie Mac? Worse yet, what about renters of landlords who don't?
Fannie Mae plans to reach out to tenants, spokesman Brian Faith said.
"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.
The details of Freddie Mac'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 probably safe because multifamily loan delinquencies are still very low. But 15 million renters, or about 40% 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," said Robert Baker, education coordinator at Housing and Credit Counseling Inc. in Kansas.
Call the sheriff's department first, Baker said. Find out how long the foreclosure process takes. Is it 60 days or 90 days? Then you will 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 has been sold in foreclosure. Other states are considering similar legislation.
The U.S. Department of Housing and Urban Development outlines tenant rights by state on its website at www.hud.gov.
The lender's name or its lawyer will be on the eviction notice. Contact either one to let them know you are 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 are nervous about negotiating with the lender on your own, contact a local nonprofit housing counseling agency for help. HUD's website lists agencies by state, or you can call (800) 569-4287.
You also can do a little digging into your landlord's financial situation if you are worried about a possible foreclosure. Go to the county courthouse or its website 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, such as past or present bankruptcy filings? These can be telltale signs of a landlord strapped for cash, Baker said.
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 is because he can't pay for them or doesn't want to spend money on a property he is about to lose.
In the meantime, save some money in a rainy-day, forced-out-of-my-home fund.