Tuesday, June 24, 2008

Renter Nightmare

Fallout from the subprime crisis:
The California Apartment Association estimates that a fourth of foreclosed single-family homes are occupied by renters.

Nicolette DeMartino, who has rented a home in Corona for the past three months, says she recently received notice that the home had been sold in a foreclosure auction. She has 10 days to move, but finding another rental on short notice is proving difficult.

Real estate agents who specialize in marketing foreclosed houses for banks say, frequently, tenants are shocked to learn their leases can be canceled and their lives disrupted even though they have dutifully paid their rent.

Nor is it always certain that tenants in a foreclosed property will get back their security deposits. Their chances are best if the house was leased through a property management company that retains the money in a trust account, but some management companies allow deposits to be kept by landlords, who may not be willing or financially able to return them.

"A great number of owners of property simply do not let their renters know they are in (default on their mortgages). They will continue to collect rent and also bring in new renters," said Darrell Moore, deputy director of Inland Counties Legal Services.

Moore said each week he sees tenants arrive in court for an eviction trial who are desperate and in tears, hoping to contest evictions. He said generally the law is on the side of the lenders who have given them 30 days notice to pack and leave.

..."You feel almost robbed in a sense," said Edward Rivera, 33. Rivera said he, his pregnant wife and two children must soon find a new home if their landlord fails to get a loan modification on the five-bedroom house they are renting for $2,250 a month in Corona.

Rivera said he and his wife leased their home through a property manager. The owner, who had just moved out of the house, would stop by occasionally to make renovations and they would share a beer, Rivera said. "We didn't know anything was wrong," he said.

But that changed in April when two real estate agents dropped by and, assuming that Rivera was the homeowner, offered to help him sell his house that they said was in default. Rivera said he later learned the owner was five months behind on his mortgage payments and trying to restructure his loan.

Landlords in default on their mortgages tend to entice tenants with very low rents and sometimes advertise that they will accept applicants with poor credit, said Pete Nyiri, owner of Top Producers Realty in Corona.

Some tenants also are being scammed by people who take a deposit and first month's rent on an empty house in foreclosure that they don't even own, he added.

...Paula Schnurr, 60, said after the three-bedroom house her family rented in Corona was foreclosed on early this year, she learned that the owner never made a mortgage payment although they had been paying rent of $1,875 a month since June 2007.

She said after a struggle she got back her deposit and found another house to rent. But she said she worries that the ordeal could be repeated.

"It is hard to trust people any more," she said.

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