Can Rent Be Assigned to a Lender During a Foreclosure?

Foreclosure occurs when a homeowner falls behind on the mortgage. During a foreclosure, the homeowner can rent the home to a tenant and collect rent each month. Rent may also be paid to the lender or new homeowner, depending on the circumstances and stage of foreclosure. In some cases, the homeowner can even become a tenant.

Tenant's Obligations

If you have a lease, you are required to pay rent to the landlord as long as the home is owned by the homeowner. Foreclosure procedures vary in each state. A foreclosure can take a couple months or longer than a year. Failure to pay can lead to an eviction, even during a foreclosure. The homeowner owns the home until the sale date. Under the Protecting Tenants at Foreclosure Act of 2009, you can finish out the duration of your lease. If the lease has expired or you are on a month-to-month agreement, you are entitled to stay in the home for at least 90 days.

Rent After a Foreclosure

Even after a home is foreclosed and ownership changes hands, you are still required to pay rent if you wish to remain in the home. The Protecting Tenants at Foreclosure Act requires tenants and landlords to abide by the terms specified in the lease agreement, which include rent. Instead of paying the former owner of the home, you will need to begin paying the current owner, whether that's a private party or a bank. If the current owner does not collect rent, set the money aside in a bank account. Landlords may use non-payment as a cause to evict you sooner.

Rent During the Redemption Period

In some states, the foreclosure process does not end with a foreclosure sale. The redemption period extends the foreclosure by allowing homeowners the opportunity to purchase back the home by paying the loan balance in full along with attorney, court and late fees. During the redemption period, which can last a couple weeks or up to 12 months, the homeowner is still legally the owner of the home. Rent must be paid to the landlord during the redemption period.

Homeowner's Paying Rent

Through Fannie Mae's Deed for Lease Program, homeowners on the verge of foreclosure can opt to become tenants and relinquish all ownership rights. Homeowners who are ineligible for solutions like loan modification can complete a deed in lieu of foreclosure, then lease back the home at the current market rate. The homeowner must be able to prove the market rental rate does not exceed more than 31 percent of their gross income. Leases are available for 12 months, with a possible month-to-month option after the lease expires.

References

• Fannie Mae: Fannie Mae Announces Deed for Lease Program
• Michigan Tenant Counseling Program: How Mortgage Foreclosure Affects Tenants
• Nolo: Renters in Foreclosure- What Are Their Rights?
• Connecticut Network for Legal Aid: Is Your Landlord Going Through Foreclosure?
• The Housing Authority of the City of Los Angeles: Protecting Tenants at Foreclosure Act of 2009