BOARD OF GOVERNORS
DIVISION OF CONSUMER
July 30, 2009
TO THE OFFICERS AND MANAGERS IN CHARGE OF CONSUMER AFFAIRS SECTIONS:
SUBJECT: Information and Examination Procedures for the “Protecting Tenants at Foreclosure Act of 2009”
This letter provides background information about the “Protecting Tenants at Foreclosure Act of 2009” 1 which became effective on May 20, 2009. This new law protects tenants from immediate eviction by persons or entities that become owners of residential property through the foreclosure process, and extends additional protections for tenants with U.S. Department of Housing and Urban Development Section 8 vouchers. 2 The law is self-executing; no federal agency has authority to issue regulations implementing the law or to interpret the law. The law expires on December 31, 2012. Examination procedures to be used in connection with consumer compliance examinations are attached to this letter (Attachment A).
The fundamental purpose of the Protecting Tenants at Foreclosure Act is to ensure that tenants facing eviction from a foreclosed property have adequate time to find alternative housing. To that end, the law establishes a minimum time period that a tenant can remain in a foreclosed property before eviction. The law does not affect any state or local law that provides longer time periods or other additional protections for tenants.
Under the law, the immediate successor in interest at foreclosure must: (a) provide bona fide tenants with 90 days notice prior to eviction; and, (b) allow bona fide tenants with leases to occupy property until the end of the lease term, except the lease can be terminated on 90 days notice if the unit is sold to a purchaser who will occupy the property. A lease or tenancy is bona fide if the tenant is not the mortgagor or the parent, spouse, or child of the mortgagor, the lease or tenancy is the result of an arms-length transaction, and the lease or tenancy requires rent that is not substantially lower than fair market rent or is reduced or subsidized due to a Federal, State or local subsidy. The law does not cover tenants facing eviction in a non-foreclosed property, tenants with a fraudulent lease, tenants who enter in lease agreements after a foreclosure sale, or homeowners in foreclosure.
Given the importance of the protections this law provides to tenants, examiners are instructed, as part of consumer compliance examinations, to evaluate an institution’s awareness of the law, its efforts to comply, and its responsiveness to addressing implementation deficiencies.
We are requesting that you provide this letter and attachment to supervised institutions, and encourage them to raise any questions about the law with their legal counsel, as appropriate.
CA letters | 2009 Letters