New Rules Cover Tenants in Foreclosed Homes

The tenant protection provisions apply for any foreclosure on a “federally-related mortgage loan,” or on any dwelling or residential real property. Under the provisions, “any immediate successor in interest” in a foreclosed property – including a bank that takes title to a house after foreclosure – assumes it subject to the rights of any bona fide tenant and certain notice requirements.

Under this law, tenants must receive notice at least 90 days before eviction. Additionally, tenants must be able to stay in the residence until the end of their lease, with two exceptions: (1) where the property is sold after foreclosure to a purchaser who will occupy the property as their primary residence, and, (2) where there is no lease (or where the lease is terminable at will under state law). However, even when these exceptions apply, tenants must still receive 90 days’ notice before they may be evicted.

The legal protections apply only to “bona fide” tenants – meaning that the lessee is not the mortgagor or a child, spouse or parent of the mortgagor; the lease is the product of an arm’s-length transaction; and the rent is not substantially less than fair market rent (unless a government subsidy). Also, it does not affect the termination requirements of any federal- or state-subsidized tenancy, or of any stricter state law that provides longer notice requirements or other additional tenant protections.

The U.S. Office of the Comptroller of the Currency (OCC) advised national banks to adopt policies and procedures to ensure compliance with the new tenant protection provisions; and it will evaluate bank compliance.

Questions can be directed to the OCC. For more information, visit the webpage at: https://www.occ.treas.gov/mail1.htm