HUD Issues Additional Guidelines to Lenders on the Federal Protecting Tenants at Foreclosure Act

 On March 15, 2012, HUD released a notice entitled “Protecting Tenants at Foreclosure Act: Additional Guidance on Notification Responsibilities Under Act with Respect to Occupied Conveyance”.

This notice provides additional guidance on the notice, entitled ‘‘Protecting Tenants at Foreclosure: Notice of Responsibilities Placed on Immediate Successors in Interest Pursuant to Foreclosure of Residential Property,’’ published in the Federal Register on June 24, 2009, and supplemented by further information published on October 28, 2010. The October 2010 notice provided guidance on the relationship between the Federal Housing Administration’s (FHA’s) current regulations on occupied conveyance and the protections for existing tenants under the Protecting Tenants at Foreclosure Act of 2009 (PTFA). This notice provides further guidance on the relationship between FHA regulations and the protections for existing tenants under the PTFA. To view the notice in it’s entirety, please click here.

The PTFA’s provisions guarantee only base-level protections, meaning the act does not supersede state laws that may provide stronger renter security. And unless it is extended, the act will expire December 31, 2014. The PTFA guarantees the following:

  • Renters who have valid month-to-month leases may remain in their rented homes for 90 days from the date the property changes ownership—specifically, from the date when the title to the property is transferred to a new owner.
  • Renters who have valid leases (including Section 8 leases) that terminate after the date when a foreclosed property’s title transfers to a new owner may remain in their rented homes until the end of the lease term.
  • For example, if a renter has a lease that ends September 30, 2012, and a new owner takes possession of the property May 1, 2012, the renter may remain in the home until September 30, 2012. The exception to this provision is when the new owner intends to move into the property. In that case, the renter may live in his or her rented home for 90 days from the date the property changes ownership. In the above example, that would be July 30, 2012.

The PTFA does not protect tenants in the following scenarios:

  • when renters are not current on rental payments at the time their rented property is auctioned at a sheriff sale,
  • when renters have fraudulent leases, and
  • when renters enter into lease agreements after the sheriff sale.
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