I know you are upset, but none of us knows what your landlord's true financial situation really is. Fortunes have been lost during this economic downturn and a medical hardship could easily cause such a loss. Be very careful about reporting anything to anyone unless you know beyond a doubt what the true circumstances are. Otherwise YOU could be held liable for potential charges of slander and libel. I know this is frustrating for you, but this is between your landlord and the bank. Take care of yourself and your family, that is your first priority, and let it go.
You dont know your landlord is acting fraudulently. Not only the poor get approved for short sales. If he can negotiate a short sale with his lender - good for him. It's really no concern of yours. Your lease runs with the property, not the owner...so this doesnt affect you at all. I would say focus on your own life and not your landlords pocketbook.
However, you have a few options and may want to consult an attorney for confirmation and ramifications. First, you can try to negotiate with the landlord for a reduced rent until it sells or to complete your lease. Of course, they don't need to drop the rent, but may do so to keep you there, have you happy about your situation, and will give them peace of mind that you will take care for the property. Second, you could leave/breach your contract and hope he can't be bothered coming after you. You would be liable in Small Claims court if they sue for unpaid rents. Third, you could stop paying and force them to evict you. This could result in a court action and an eviction on your credit report. They judge will have no sympathy on you that they are not paying the mortgage. That is totally irrelevant to the contract you signed promising to pay. You could also be liable for damages.
I would recommend that you talk to the landlord and tell him your frustrated and that you know he is not paying. See if they are willing to work with you or give you a discount. One other thing to consider is if you think you are going to get your deposit back? If you don't think so, you will either need to take small claims action or use the security as last months rent, which most leases state that they do not allow. When you do move out, they have exactly 21 days to return your deposit or give you an itemization of what they deducted.
Make sure to read and understand your lease and terms. ALSO, TAKE TONS OF PICTURES WHEN YOU DO LEAVE! They are invaluable in any court case with regards to security deposits! You should also review your rights in the California Tenants Handbook - http://www.dca.ca.gov/publications/landlordbook/catenant.pdf
GOOD LUCK and feel free to contact me with any questions.
The important thing here is that you honor your obligation, which is to keep the property in good condition and pay the rent!
Hope this helps
Did the bank keep their promise to refinance in five years when the owner initially took out the mortgage?
Did the bank deal honestly with the owner or offer honest options when asked for a modification?
Did the bank accept responsibility for steering the owner into a zero interest balloon when he was clearly eligible and would have greatly benefited from a fixed rate mortgage?
Folks who are 'worth millions' become so by looking after their assets and making strategic decisions the keep their wealth from eroding. This owner is giving the bank the same choice.
The bank can carry this to forecloseure and take the loss. (if any really exists, that 900 billing went somewhere)
The bank can grant a short sale and reduce thier suggested loss a bit.
The bank can and should adjust the principle and refinance the home.
The choice is the banks.
Don't blame the citizen. The problem is and has always been the banks failing to operate in good faith.