This seems to be a popular question. Here is something I just posted on another question.

The tenant has signed a lease agreement with the landlord to pay rent in exchange for shelter for a certain period of time. It really doesn't matter what the landlord is doing with the money. The tenant is still bound by the terms of the lease agreement. Stop paying rent breaks the lease agreement and the tenant may not be able to get security deposits back and actually could be evicted if the landlord wants to go in that direction.

If the house goes into or is foreclosed on, there are tenants rights involved and many times the bank will pay the security deposit back.

Please contact a local housing lawyer. The foreclosure issue is between the landlord and the mortgage lender and from my experience here in MA does not obsolve the tenant of their responsibility to stay current on their rent, but only a lawyer in your area can answer that question accurately for you.