Renters newest victims of Housing Bust.

[SirNitram]

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The Bush administration's announcement Tuesday that it would put the foreclosure process on hold for 30 days to rescue struggling homeowners came several weeks too late for Mike Salgado.

And he's not even a homeowner.

Salgado, 40, is one of many renters who have found themselves homeless after their cash-strapped landlords stopped making mortgage payments and their houses or apartment buildings were foreclosed upon.

The California Apartment Assn., the state's largest organization of rental property owners, estimates that as much as a quarter of all foreclosed single-family residences are occupied by renters. The number of renters ensnared in the foreclosure fiasco is even larger when duplexes and other multi-unit buildings are factored in.

And the evictions show no sign of abating. Total foreclosures of single-family homes statewide rose more than 400% to a record 31,676 in the fourth quarter from a year earlier, according to DataQuick Information Systems.

"It's definitely happening," said Phyllis Rockower, president of the 850-member Real Estate Investors Club of Los Angeles. "People e-mail me all the time with the saddest stories."

Rockower's own daughter is facing eviction from a rented home in Colorado. Eileen Bronchick, 39, said she received notice last month that the landlord of her town house had missed mortgage payments and that she might have to move if the property is foreclosed upon.

For many such people, this can mean even steeper rents because the wave of foreclosures has spurred greater demand for rental housing -- a blessing to landlords who don't have banks breathing down their necks.

Sixty percent of Los Angeles residents are already renters, according to the National Multi Housing Council, an industry group. That compares with a nationwide average of 32%.

State and local officials say that many evictions could be avoided if people knew the legal protections available to them. However, few lenders and property managers make such information available during the eviction process.

"The whole thing is terrifying," said Michaelyn Jones, general counsel to the Santa Monica Rent Control Board, which oversees some of California's toughest rent-control rules. "It's something a number of jurisdictions have been discussing because it's a growing problem."

Many now-foreclosed properties had been purchased by real estate speculators taking advantage of dirt-cheap loans, who rented the properties to tenants before falling behind on mortgage payments.

To help remedy the situation, the Bush administration and six major lenders said they would "pause" foreclosures for troubled homeowners. The plan, dubbed Project Lifeline, is intended to give lenders time to work out more-affordable terms for borrowers.

Delores Conway, director of USC's Casden Real Estate Economics Forecast, said it was difficult to measure the number of tenants affected by foreclosures because more people were renting directly from owners of houses and condos.

This "shadow market" of renters isn't being tracked by organizations that compile statistics on established rental properties, Conway said, adding that the number of such renters has grown in the Inland Empire.

Karen Fricke, executive director of the Apartment Assn. Greater Inland Empire, an organization of rental property owners, said it was no secret among landlords that many renters were getting caught up in the mortgage meltdown.

"I'm getting a lot of phone calls from members of our association saying they're going into foreclosure and asking what to do about their tenants," she said.

Salgado, who works as service manager for a San Bernardino boat dealer, returned to his rented Hesperia house Jan. 23 to find a notice from his property manager, Century 21 Fairway Realty, informing him that the property had been foreclosed upon.

The notice offered an "assistance check" in the amount of $1,250 if Salgado would agree to get out of the house by Feb. 5.

"It is to your benefit to accept this assistance check," it said. "Please keep in mind that the eviction process has started."

Offering financial inducements is a common practice when renters are being pushed to vacate a foreclosed property. It's called "cash for keys" and can involve payments of as much as $1,500, ostensibly to help a tenant resettle but also to get him or her to waive any claims to the rental property.

Salgado was told by Century 21 that if he didn't agree to the deal right away, his resettlement money would be slashed to $750 within a week and then to $500 a week after that. Then it would drop to nothing, and he'd still have to move out. "I felt very pressured," Salgado recalled.

He said he agreed to the $1,250 payout and moved himself and his two kids -- ages 2 and 3 -- to a nearby motel. His dog and cat were put in a kennel.

It was, to say the least, a less-than-ideal situation.

State officials said that under California law, existing rental agreements are essentially wiped out when a property is foreclosed upon. All that's required is that a tenant be given at least 30 days' notice that he or she is being evicted.

But those officials also said that state law can be trumped by local rent-control statutes, which often provide tenants with more far-reaching protections.

These "just cause" provisions of many municipal rent-control laws limit the ability of landlords to evict tenants, even those on month-to-month leases. They also include cases in which ownership of a property changes hands, such as a foreclosure.

"Tenants cannot simply be evicted," insisted Adam Radinsky, who heads Santa Monica's consumer protection unit. "There's no question about that."

Actually, it depends on where you live. Cities with "just cause" provisions include Los Angeles, San Diego, Santa Monica, Thousand Oaks, West Hollywood and Glendale.

However, not all "just cause" provisions are created equal. San Diego's requires that a tenant occupy a property for at least two years before the provision takes effect. Glendale's allows an eviction to proceed if the landlord plans to remove the property from the rental market or have a relative move in.

Moreover, not all rental properties may fall under a city's rent-control protections. In such cases, state law would probably apply, which would allow a foreclosure-related eviction to go ahead.

"In that case, the tenant may be in a really lousy position," said Al Shelden, chief of consumer law in California Atty. Gen. Jerry Brown's office. "There may not be many rights to begin with."

That was the predicament Salgado found himself in. Hesperia has no rent-control law and no "just cause" provision. State law thus allows him and his family to be thrown out on their ears.

Salgado said he was told by Century 21 that he'd receive his check right away. So he immediately found another house to rent in the vicinity.

But no check arrived. And as the days in the motel passed, Salgado said he quickly ran out of money. He moved his family and pets to his mother's Beverly Hills apartment this week. He has to commute about 150 miles a day to and from work.

A spokeswoman for Century 21 said Tuesday that she expected Salgado to receive his check by the end of the day.

If you are a renter and receive a notice from a bank or property manager saying your rented home has been foreclosed upon, contact City Hall to find out what rent-control rules may exist in your area and whether the property is protected.

Salgado said he hoped that once he got his check, he'd be able to relocate his family to a new home in Hesperia. All in all, he added, everyone's taking things in stride.

"Except our cat," Salgado said. "He's really freaking out."

The lenders and borrowers of the bubble deserve each other: Idiots who didn't think about anything but living beyond their means or profitting off endless economic growth, and sociopaths who committed fraud, bad math, and bullshitted everyone for a profit always do. But the fallout, as always, is going to get everyone, even those sensible enough to say 'This is nuts, we can't afford a house.'

[Alferd Packer]

Wow, sucks to be a Californian. Here in NJ, you can only be evicted on a foreclosed property for cause. So, assuming you don't give the bank cause to evict you, you can stay in a foreclosed rental property until your lease expires.

[Broomstick]

I'll have to check the law where I live, but I believe that in the event of change of ownership of a rental property where I live all existing leases must be honored for their full duration and month-to-month renters get, I forget which, either 6 months or 12 to find a new residence.

I'm not too worried, though - my landlord has owned this building for 30 years. He may have taken out a second mortgage on it at some point, but he has always been adamantly against ARM's despite using real estate as his primary investment vehicle and owning dozens of properties. In other words, all his loans are fixed-rate.

[Joker]

The lenders and borrowers of the bubble deserve each other: Idiots who didn't think about anything but living beyond their means or profitting off endless economic growth, and sociopaths who committed fraud, bad math, and bullshitted everyone for a profit always do. But the fallout, as always, is going to get everyone, even those sensible enough to say 'This is nuts, we can't afford a house.'[/quote]

It's a sad fact that some people have a hard time dealing with BUT not everyone can afford to be a homeowner. FannieMae, mortgage brokers, and ill-informed homebuyers are to blame.

[Xisiqomelir]

This is the only advantage of renting from a soulless RE megacorp like Equity or the Irvine Company. They're not overextended on 6 wildly leveraged flipping projects, so they won't go busto and take your apartment with them.

[Bedlam]

Wouldn't it make sense for the bank to start renting the property to the current tennent if the landlord can't make the mortgage payments? At least they would have some money coming in from the property then, is the bank really likely to be able to sell the property on quickly in the current market?

[Broomstick]

I don't know the legality of the situation.

There is the problem that if the bank takes over as landlord the bank also has the responsibilities of a landlord - and may not have the expertise or personnel to do this in a competent manner. I suppose a management company could be hired for that role, but it's an additional expense. If there's an expectation of rapid sale a month or two with the bank as landlord might make sense but if a quick sale is not anticipated that may not be, from the bank's viewpoint, the prudent thing to do.

[Einhander Sn0m4n]

If anything, the stupid greedy assholes and the lying greedy criminals will try their hardest to shunt the Consequences onto people people undeserving of them. This is likely to be one of the primary propagation mechanisms for economic hardship.

[Col. Crackpot]

I don't know the legality of the situation.

There is the problem that if the bank takes over as landlord the bank also has the responsibilities of a landlord - and may not have the expertise or personnel to do this in a competent manner. I suppose a management company could be hired for that role, but it's an additional expense. If there's an expectation of rapid sale a month or two with the bank as landlord might make sense but if a quick sale is not anticipated that may not be, from the bank's viewpoint, the prudent thing to do.

Bank of America actually has property management arm. Deduct the mortgage from the rent and assess a fee and viola! The customer receives a check or direct deposit for the difference. Generates fee income for the bank which is very much en vogue these days.