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Protecting Tenants at Foreclosure

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  • #32228
    Dana Staley
    Participant

    I have a question pertaining to the Protecting Tenants at Foreclosure Act. When we take foreclosure action on a dwelling, the bank takes steps to identify whether the property is occupied by a bona fide tenant. If one is identified a letter is sent to inform them of their responsibility to pay rents to the bank. Included in that letter is a request for a copy of their lease agreement. Once foreclosure is complete, if the Bank becomes the owner of the property, the tenant is sent notification of the ownership change and the requirement to continue to pay rent to the bank. Although the bank requests a lease agreement, these are not always provided and we don’t require it. If a lease is not provided, the tenant is considered to be under a month by month lease. My interpretation of the law is that if a bona fide tenant is identified, the successor in interest must permit the tenant to continue occupying the dwelling through the remainder of their existing lease, except that 90 days notice to vacate can be given if the property is sold to someone who intends to occupy the home as a primary dwelling. If there is no lease, or there is less than 90 days on an existing lease, a 90 day notice must be provided. With regard to state and local, these will only apply if they allow for greater protections to the tenant. It is not the bank’s practice to evict tenants provided there are no safety concerns with the property and the tenant continues to pay rent. My question is whether there are any exceptions to the 90 day notice to vacate. The LOB has stated in its’ procedures that the time limit on the Notice to Vacate for failure to pay rent depends on the State Law in which the property lies (in our state, this is much shorter than 90 days) and that, if a tenant with a valid lease is evicted for any reason other than failure to pay rent, the requirements of the PTFA would apply. This is not how I interpret the requirements of the PTFA but would like another opinion on the matter. Is there other regulatory guidance that would provide a shorter than 90 day notice in the event that a tenant did not satisfy the lease agreement, such as by failure to pay rent, that should be taken into consideration?

    #32282
    rcooper
    Keymaster

    I’m not aware of any exception to the 90 days. FRB Consumer Affairs Letter: https://www.federalreserve.gov/supervisionreg/caletters/caltr1804.htm. See paragraph #2 regarding state law,”[t]he law does not affect any state or local law that provides longer time periods or other additional protections for tenants.”

    I always find the regulators’ exam procedures helpful. Here are the PTAF procedures from the FDIC: https://www.fdic.gov/regulations/compliance/manual/5/v-16.1.pdf.

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