Tenants Cry Foul Over Rent Skimming Landlords

Friday, September 12, 2008
George Warren
News 10 KXTV

Tenants in a new subdivision who paid their rent on time were shocked to learn their homes are in foreclosure.

"It
frustrates me. I'm very angry," said Vanessa Moore, clutching a notice
of trustee's sale that had been posted to the front door.

Moore said her family has paid $1,550 monthly rent for the past year only to find the house is being sold at auction on Friday.

"Now I have a family that has to move out of their home," Moore said.

At
least a half dozen neighboring homes on Clay Creek Way in north
Sacramento are in various stages of foreclosure according to data from
Foreclosures.com. All of them were purchased new from builder AK Custom
Homes in 2007 and 2008 and appear to be rentals.

"Red flags are
flying up everywhere," said Mike Crowley, who lives at 4257 Clay Creek
Way and just discovered his home is in default. Crowley said he pays
$1,850 monthly to a woman in Modesto named Derricka Jones.

Property
records shows Jones owns three homes on Clay Creek Way and all three
are in default. All of them were purchased this year and information
contained in the default notices suggests not a single mortgage payment was ever made.

"A scam, OK?" said Stephanie Wilson, who lives in one of Jones' homes. "You pay your rent regularly. Where's the money going?"

Efforts to reach Jones were unsuccessful.

The
real estate broker who collects rent from Vanessa Moore's family
insisted to News10 she has no ownership interest in the home and would
not say where the rent money is going.

"I can't tell you anything," she said.

The practice of landlords collecting rent on new homes and not paying the underlying mortgage is known as rent skimming and is illegal.

California law allows tenants to recover money damages from the owners, including moving expenses.

What's
happening on Clay Creek Way bothers Chris Levy, among the handful of
owners who actually live in their homes. "I think it's totally wrong
what they're doing," he said of the other owners.

Urgency state
legislation passed this summer partially addresses the problem facing
renters who lose their home because the owners stop making payments.

Senate Bill 1137 allows tenants in foreclosed homes to remain at least 60 days after the
lenders take possession, but an early-warning provision to notify
tenants when the owners first go into default was stripped from the
legislation.

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