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And let's find out now what happens to a renter when a property goes into foreclosure. Many continue to pay rent even after the landlord stops paying the mortgage, which does not necessarily stop a renter from being evicted. Cathy Duchamp reports.
CATHY DUCHAMP: I found Deborah Stokes on Craigslist in Washington, D.C. Her ad was in the housing wanted section.
Ms. DEBORAH STOKES (Curator, National Museum of African Art Smithsonian Institution): I'm a good renter, and I want to look for a good landlord.
DUCHAMP: Stokes moved from Chicago to Rockville, Maryland, last fall looking for a fresh start as a curator at the Smithsonian's African Art Museum. But five months after Stokes signed her lease, the landlord told her the condo was heading into foreclosure.
Ms. STOKES: I've rented many apartments all over the world. I've rented in Chicago, Los Angeles, New York, Australia, Amsterdam, Africa. I've never been in this situation, never.
Mr. JOHN NETHERCUT (Executive Director, Public Justice Center): Quite frankly, they're one of the innocent victims.
DUCHAMP: That's John Nethercut. He runs Public Justice, a Baltimore tenant's rights group. Nethercut says renters make up about 40 percent of families facing evictions due to foreclosures, a study picked up from the National Low Income Housing Coalition. Nethercut says in most states, until recently, there was no more formal way to notify renters about foreclosures and no legal requirement to do so.
Mr. NETHERCUT: As a result, a lot of tenants were honestly surprised. They've been paying their rent. They didn't even know there was a problem, and then they get an eviction notice from the sheriff.
DUCHAMP: That's starting to change. More than a dozen states now require that tenants get a notice when they face eviction due to foreclosure. Congress is considering a plan to make a 90-day notice mandatory all over the country.
Fannie Mae and Freddie Mac have stopped evicting tenants from homes they repossessed. Instead, tenants can rent month-to-month until the homes are sold. New Jersey, Massachusetts and Washington, D.C., require that people who buy foreclosed properties honor existing rental contracts. But the banking industry says that goes too far.
Ms. KATHLEEN MURPHY (President, Maryland Bankers Association): I would say that it creates a disincentive for individuals to purchase foreclosed properties.
DUCHAMP: Kathleen Murphy leads the Maryland Bankers Association. She says extending leases beyond a foreclosure sale would kill most deals, forcing banks to become landlords, something they don't want to do. Murphy says most renters know that their situation can change anytime — foreclosure or not.
Ms. MURPHY: My mother lived in a condominium at one point that was a rental building. In three years' time, she moved four times because the individual that she was renting from in each instance had decided that they were no longer going to rent or they're going to put their place up for sale. So it is just one of those risks, I think, that you take as a tenant.
DUCHAMP: Back in her condo, Deborah Stokes dreads the packing that lies ahead. She's got lots of antique furniture, hundreds of art books, and no money saved for the move. Stokes says this time around when a landlord asks for $35 for a credit check, she'll say…
Ms. STOKES: Well, I'll need $35 from you to run a credit check on you. The next rent that I pay, I'll know who I'm renting from and what their resources are, what's behind that property.
DUCHAMP: And what do you know, there's a company offering something like that. RealtyTrac sells what it calls Renter Alerts. For $25 a year, you can find out if there's any foreclosure activity on the place you rent or want to. The service is limited to the 1.8 million properties RealtyTrac monitors mostly in urban parts of the country.
For NPR News, I'm Kathy Duchamp.
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