Chauntay Barnes and Edgar Letriz, who live near each other in Connecticut, have many things in common. Both rent homes whose owners defaulted on their mortgages. Both say they never missed a rent payment. And both received eviction notices after the lenders foreclosed. But there is a major difference.
The mortgage on Ms. Barnes's house in Hamden is controlled by Fannie Mae, which in January stopped evicting renters from foreclosed properties. The mortgage on Mr. Letriz's three-family house in New Haven is controlled by HSBC, a London-based bank.
Ms. Barnes is now awaiting a month-to-month lease, valid until Fannie Mae sells her home; Mr. Letriz, on the other hand, is facing eviction.
Renters like Mr. Letriz and Ms. Barnes have long been unsuspecting casualties in the foreclosure crisis, facing eviction through no fault of their own, often with little warning. When the government-controlled mortgage companies, Fannie Mae and Freddie Mac, started offering leases to renters of foreclosed properties, lawmakers and housing advocates hoped that other lenders would follow suit.
But so far, action has been minimal.
"This has been a silent issue that is now gaining steam and attention," said Marietta Rodriguez, director of national homeownership programs at NeighborWorks America, a nonprofit network of community housing groups. "A lot of states and municipalities are trying to see what they can do" to require banks to extend leases.
So far this year, 30 percent of homes that received foreclosure notices were occupied by someone other than their owner, according to RealtyTrac, which collects foreclosure data. The federal government's recently announced $75 billion housing rescue plan leaves renters unprotected because it applies only to a homeowner's primary residence, not rental properties.
After renters are evicted, properties often remain vacant and become neglected or vandalized, hurting neighborhood property values and creating eyesores - a loss for lenders as well as residents, housing advocates say.
"Is it explicable?" Ms. Rodriguez said. "Not really. It affects the displaced tenant, the value of the building, the neighborhood. Nobody wins."
Banks say that they are not in the business of being landlords and that properties with no occupants are often easier to sell.
Renters caught up in foreclosure face a tangle of often unreachable banks and fears of losing their security deposits along with their homes.
For Ms. Barnes and Mr. Letriz, foreclosure was terrifying, beginning with the eviction notice.
"I thought, 'Oh, my God, I'm going to be out on the street with my kids,' " said Ms. Barnes, 30, a mother of two who is studying to be a nurse.
Then in December, Fannie Mae notified her that it would temporarily halt evictions, and planned to extend leases to renters until it sold the foreclosed buildings. Freddie Mac adopted a similar policy in March.
Though Ms. Barnes still does not have a lease, the company's promises have eased the stress on her family. She has not paid the rent since receiving the eviction notice in September, but said she was ready to resume payments as soon as she got a lease. She laughed mildly over some of the house's maintenance problems, including a rotting front step.
"I told my kids it's a go," she said. "No more being sick from worry. Plans can be made now - no more what ifs."
Mr. Letriz, 39, has had no such reprieve. With a degenerative disc disorder that requires him to use a walker, Mr. Letriz is on disability leave from his job as an assistant dean at Yale College. He shares a neat second-floor apartment with his sister Mariam and her two children. Ms. Letriz is expecting her third child this month.
"I've had sleepless nights and psychiatric counseling because of the pain, and now this causes more stress," Mr. Letriz said. "I'm not capable of moving. I can't pick up even a gallon of milk."
On Feb. 23, a marshal delivered a notice instructing him to respond or move out by March 16.
The first notice was just the start of the process, said Amy Marx, a lawyer at New Haven Legal Assistance who is representing the Letrizes. "But most people, when they get the notice to quit, pack up their bags and go."
New Haven Legal Assistance has urged banks to adopt policies similar to Fannie Mae's, extending month-to-month leases until a foreclosed property is sold. But so far, Ms. Marx said, "none of the banks have been willing to let tenants stay."
"They either offer cash for keys," Ms. Marx said, referring to the practice of offering renters money to move before eviction, "or a little extra time, usually two or three months."
Though banks are required to return renters' security deposits, that does not happen often, Ms. Marx said.
Properties like the Letrizes' house, where the mortgage has been bundled into a securitized trust, often fall between two banks with different interests: a trustee for a pool of securitized mortgages and a servicer hired to manage the individual loans.
The trustee in the Letrizes' case, HSBC, is named on the suit to evict them. The bank stands to lose money on the property if it is vandalized.
But HSBC said in a statement that the servicer, Wells Fargo Home Mortgage, handled all questions on whether to evict tenants. Wells Fargo said in a statement that it did not have a summary eviction policy, but it could not name any instances in which it had extended a lease when not required to by state law, even though some trustees, including Deutsche Bank and U.S. Bank, have recently advised servicers to consider allowing renters to stay if it benefits the trust.
Wells Fargo also said that it had offered Mr. Letriz money to move, which he rejected (the normal cash-for-keys offer is $1,000 to $3,000).
Ms. Letriz, who is in her second year of training to be a nurse, said the whole process seemed arbitrary. "Your life is not being considered," she said. "You make a plan to go to nursing school, to help your brother, to send your children to school in New Haven. Now you have to get up and go. It breaks apart a family."
A spokeswoman for Fannie Mae, Amy Bonitatibus, said it expected to break even on rentals, hiring real estate agents to manage the properties. But so far, the program's impact has been limited. The company controls about 1,800 foreclosed properties.
Several states, including Connecticut, have introduced legislation to require banks to continue renters' leases after foreclosure. A similar bill has been introduced in Congress, where previous versions have failed.
In the meantime, banks in Connecticut have been unwilling to extend leases, said Cynthia Teixeira, manager of dispute resolution for the state's housing courts.
That leaves Mr. Letriz, who is awaiting surgery on his back, in limbo.
"So many things are up in the air." he said. "It's a lot of uncertainty."
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