Bank and Government Foreclosures Affect California Renters

by on States

More and more renters who are updated on their monthly payments are being evicted unceremoniously as their landlords failed to inform them that the houses they are renting are under bank and government foreclosures.

California is one of the states hardest hit by bank and government foreclosures. In February of this year, about 80, 755 foreclosure filings were reported in the state. Data from RealtyTrac showed that bank and government foreclosures in California increased by 5 percent from January to February of the current year.

California foreclosures posted an increase of 51 percent in 2009 compared to figures of last year. In 2008, about a third of the state’s total foreclosure sales of 267,000 were rental houses, according to Dean Preston, Tenants Together executive director.

California is home to about 5 million rental units. And more and more renters are scampering to find an affordable place to live as bank and government foreclosures continue to soar.

Benchmark Co. LLC analyst William Acheson said that banks and mortgage lenders would rather flood the housing market with vacant properties than act as landlords. He added that banks do not have the staff or infrastructure to handle rental buildings.

He pointed out that banks are very ineffective as property managers and would prefer to sell foreclosed properties at 60 percent discount rather than hold on to them for rent.

The National Low Income Housing Coalition reported that over 20 percent of distressed properties in the country facing bank and government foreclosures were rentals as of December last year. The report also pointed out that these tenants accounted for nearly 40 percent of people who are facing eviction due to bank and government foreclosures.

Meanwhile, mortgage finance companies Federal Home Loan Mortgage Corp. and Federal National Mortgage Corp. have employed property managers to coordinate with tenants and offer them affordable lease rates.

Nearly 20 percent of about 29,000 homes that Federal Home Loan owns are occupied by former renters or owners.

On the other hand, over 225,000 tenants in California lived in houses that went through bank and government foreclosures in 2008, according to Tenants Together. Data from the U.S. Census Bureau showed that if banks will rent all the properties they foreclosed, they could collect as much as $1 billion in payment yearly.

California’s Department of Consumer Affairs said that state policy requires landlords to notify renters a month or two before the eviction.