Foreclosure in 90277>Question Details

tsuami, Renter in Redondo Beach, CA

Property in default and now in short sale. Renter in back house not paying rent as agreed.

Asked by tsuami, Redondo Beach, CA Fri Feb 10, 2012

So I started missing payments in 2009 due to work hardships. I then tried working with the lender B of A over and over to get the loan modified. Ethically, I should have paid whatever I could when I could but I opted not to as I sunk further and further behind and the late fees piled up and was told any $ I paid would go to the fees first. At the same time the bank was telling me the fees would go away in a loan mod, so I decided not to throw $ at fees that would be forgiven anyways, wanting my payments to go to paying down principal. Things only got worse as the bank kept dragging on my loan mod attempts and what little income I was making dropped as my renter got hit too and stopped making full payments. The renter is now behind some $13,000 and is claiming he owes me nothing stating its illegal for me to collect rent when I'm in default anyways. I'm told CA judges rule in favor of the landlords however, even if it is considered mortgage fraud to collect rents when not paying.

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16
Always a tricky subject, but the general consensus is that if a rental/lease agreemnt exists, it must be paid as agreed, or you can evict. Remember that most Realtors, myself included, are not attorneys and the opinions given are from their experiences -

Hope it all works out for you!
2 votes Thank Flag Link Sat Feb 11, 2012
Your friend is not entitled to anything and you should not feel bad for your friend. He is using you and apparently doesn't care what you are going through. With friends like that, who needs enemies. If I was representing you in a short sale, I would advise you to immediately evict him. If you get a buyer and the lender approves your short sale, you will have more problems at that time getting him out and then can lose your buyer. You have been given good advice in the answers here, you just need to take action.
2 votes Thank Flag Link Sat Feb 11, 2012
Who said it's mortgage fraud? I'm not your Realtor but if i were i would tell you that ''you have not been foreclosed on and are legally still the owner of the property and as the owner you have the right to receive rents. If a tenant doesn't want to pay rent, then you start with the eviction procedures and sue for back rent.


DANNY PATRON
Villa Group Real Estate
Cell: 310-966-7957
DRE LIC# 01457384
PatronSoldit@gmail.com
2 votes Thank Flag Link Fri Feb 10, 2012
If you don't have anything in writing with your now ex-friend/renter, he could be considered just a "roommate" with no written lease & you may be able to get him out with the 3 day notice (pay or quit / move out). Then again, I believe that if the renter could otherwise 'prove' that he's been renting your property (paying utilities or otherwise claiming residency on his/her taxes) for 12mos or more, you may have to give him/her 60 days notice to move.

You can collect rent while also not making pymts to your lien holder, it's NO BUSINESS of the renter what you do with the rent money.

BofA has NO INTENTION of EVER giving you a viable loan modification that will make sense for you. If you've been working with them since 2009, all BofA has SUCCESSFULLY accomplished is YOU nibbling at the carrot they've been placing in front of you. BofA KNOWS that either you will choose to do a short sale (even though they won't come out & tell you to do one) OR they KNOW your property will be theirs, when they want it (auction or foreclosure)

That's the thing, they don't want it right now, they don't want more REO inventory, so they've been dragging you through the dirt, giving you false hopes of getting a loan mod, as YOU "manage" what they look at as one of their future assets. Instead of just telling you at any time in 2010, "No, we're never going to give you a loan mod", they've got you possibly making trial loan mod payments, ruining your credit even more, while yur providing them security from vacant home squatters, of 'their' future asset.

If BofA made loan modifications & short sales look too easy, everyone who's underwater on their loans would all default immediately & the banks would go bust & there would be chaos & anarchy in the streets.

What you need to do is a short sale, get out, get it done, go rent somewhere for a couple years, pay your other creditors ON TIME, get your FICO score back up & if you're lucky when you're ready to buy again with an FHA loan & 3.5% down, interest rates will still be low & you'll build up new equity!

Shoot me an email directly if you want to talk about this some more, I don't look back on this same Trulia thread for answers posted after mine.

EmilyKnell1@yahoo.com
562-430-3053 c
Realtor Since 1996
Main Street Realtor
Short Sale Expert
1 vote Thank Flag Link Sat Feb 11, 2012
Nonsense. I worked for BoA for four years doing loan mods. I would have been shown the door were l to drag my feet.

Mods happen when homeowners meet qualifying guidelines that both the lender and the Treasury Department (HAMP) establish.

If the homeowner doesn't qualify, even after reducing the interest rate to 2%, as well as a reduction in principe, whose fault is it?

Trial mod. payments are not a stall. Some home owners, and their reps. are not as honest with their disclosures. If there are any payment issues, after the mod. they tend to surface within the first 90 days of the new payments.

Some HAMP and in-house mods. by the way, don't have any trial periods connected with them.

As to the question originally asked, if there is a signed and dated lease/rental agreement, then those terms and conditions would not have anything to do,with the default situation, other than your not being able to use that rent as any form of income.
Flag Sun Aug 18, 2013
The bank is probably not going to modify your loan if you do not have income.
1 vote Thank Flag Link Sat Feb 11, 2012
You should give the tenant a 3 day notice to pay or vacate. As long as you have a signed lease, the renter must pay the rental amount in the lease agreement. The tenants lease is a completely separate contract from your loan. It sounds like it is time to consider other options if your loan mods are going nowhere.
1 vote Thank Flag Link Fri Feb 10, 2012
Your renter is obligated to pay his rent if he has a written contract with you. I suggest that you contact an attorney and start the eviction process. I would definately give him his 3-day notice to pay his rent or move immediately. His rent has nothing to do with you paying your mortgage.
1 vote Thank Flag Link Fri Feb 10, 2012
I agree with comments below, that you need to start the eviction process because it will be much easier to sell and that new owner won't want that tenant anyway since he has not been paying. But what I have seen in cases where the bank, for whatever reason, has not foreclosed, is that they will sell off this loan and the new bank will quickly send you an NOD Notice of Default and start foreclosure proceedings. Forget the loan mod (very few ever work out).

I know this is an older post, but if you have not already, I suggest you get an agent to start working on the short sale yesterday. Also the mortgage debt relief provisions for homeowners in the federal tax code, first enacted in 2007, expired at midnight on December 31, 2012. But the fiscal cliff bill enacted at the 13th hour by the Congress extended the relief through the end of 2013. There is no indication that this will get extended again, which means that all principal balances unpaid by the homeowner and forgiven by the lender would will be treated as ordinary income to the homeowner.

Tony Warfield
Associate Broker
3 Leaf Realty
Manhattan Beach
(310) 634-9342
0 votes Thank Flag Link Mon Sep 9, 2013
tsuami, first and foremost I do look back on this same Trulia thread for answers posted after mine. So by all means please stay in touch via this thread or you can email me at onthelevel@cox.net. I actually had a client that was in a lease situation with a homeowner who wasn't making their payments to the bank and actually went into default.

As it turned out I recommended they contact an RE attorney. The attorney instructed them to quit making their payments directly to the homeower and to put the equivilant of the payment into a savings account. Don't ask me how or why what grounds the attorney had for doing this but he did.

About 6 months passed and the home was sold in foreclosure. The new owner offered a $12k cash for keys and that along with the 36k that my client set aside gave them almost enough for a down payment on another home and a payment that was very close to the 6k/mth lease payment they had saved.

Personally I don't advocate anything that even looks remotely illigal. However, my point here is that I've seen some pretty crazy things happen in this industry during the past 40+ years that I've bought and sold RE. So bottom line is I wouldn't put anything past attorneys, judges or juries nowadays. It's dog eat dog and anything goes. Good luck.
0 votes Thank Flag Link Sun Feb 12, 2012
My opinion after talking to many many people about loan mods & just witnessing what the banks are doing, if the bank cannot take your current income & asset information, do a valuation on your property & give you a viable loan modification for the life of your loan that Makes Sense for you in UNDER 4mos (and I'm being nice with that figure), then the bank N E V E R intends on granting you a loan mod.

Trial payments are a load of BS, it's property management in reverse with you paying the bank for what they KNOW will become their future asset OR you're smart & you do a short sale (I think you're falling under the smart category) Seriously, it ONLY took the bank 3wks or so to initially look at your income, asset & employment information to give you the loan in the 1st place. Anyway, I could write a book about this & maybe I will. If the banks made loan mods & short sales easy peasy, everyone who's underwater would do one or get one & the banks would go bust.

I have worked with numerous investors & we've completed their short sales while there are still renters in the house paying rent & in turn the investor is NOT paying the bank. I can never tell a homeowner to stop paying the mortgage or tell them to keep collecting rent & not make payments. I cannot tell them that. BUT, the way the owner feels about it is Hey, they tried to do the responsible thing by giving the bank the shot at working with them on a loan mod or principal reduction & they didn't play ball so there.

Owners who had been making many trial loan mod payments & have renters feel that all those months they paid the trial pymts, only for the bank to deny them the loan mod, they feel it's ok to collect rent, kill the loan mod effort & go with the short sale & not pay the bank with those rent payments. Again, the bank had their shot at keeping a customer & they BLEW IT!

We've always been able to get the bank to agree to the short sale without wanting to pursue in the future for deficiency judgment, even before the laws came out protecting them from this should the bank agree to the short sale. I have never had a lien holder demand the rent payments be turned over to them. Of course, depending on your lien situation you may be faced with the lien holder asking for a cash contribution in order to give you short sale approval, this can be negotiated & if you properly explained this to your current buyer up front, you can usually get them to pay for it or split it with you.

In order to keep your tenant paying as long as possible, a reduced rent is suggested. If your renter isn't going to pay you at all, kick him out! What you don't want your renter to do is file Bankruptcy & then the buyer of your short sale is stuck with the problem & can't move in without going through an eviction process.

Shoot me an email directly if you want to talk about this some more, I don't look back on this same Trulia thread for answers posted after mine.

EmilyKnell1@yahoo.com
562-430-3053 c
Realtor Since 1996
Main Street Realtor
Short Sale Expert
0 votes Thank Flag Link Sun Feb 12, 2012
Thanks everyone- what an active forum!! As the thread title states, I am now in a short sale and the house is in escrow, so no representation needed- but thanks. I hope the agents that post here do get work from these forums from time to time.
Can anyone elaborate more on the subject- whether or not it truly is "bank fraud" for an owner in default to collect rents?
Also, can everyone weigh in more on the idea that a renter should pay less if a property is in default- especially if it is clear the owner is paying nothing- no trial payments, etc- AND has no intention of paying ever again such as entering into a short sale agreement- where I suspect NO owner ever pays a dime knowing the property is leaving their name no matter what. If I was actively still pursuing a loan mod or even going into foreclosure with no sure idea that the debts will be forgiven then maybe a different story. Ultimately, I'm trying to put myself in my renters shoes- he has had to deal with a few showings to prospective buyers, bank inspections, insurance inspections, etc.- and the uncertainty of having to move (however the new buyer has agreed to take him on but he'll be back to full payments). Now of course I bear the burden of responsibility, of credit ruin, still pay utilities and taxes, am losing a big down payment, etc. So some say ITS NONE OF THE RENTERS BUSINESS and if you rent you pay, but I'm trying to be more ethical in believing that if I'm paying less then I want to pass on some of the savings to my tenant.
0 votes Thank Flag Link Sat Feb 11, 2012
Tsuami,

You should definitely get your renter out of your property. You could be receiving premium rent in the Redondo Beach area, plain and simple. You should have a professional review what steps have been taken with B of A thus far to determine how to approach them going forward.

I would be happy to discuss what options may be available.

Susan Morrow
RE/MAX Execs
1720 S Elena Avenue
Redondo Beach, CA 90277
(310) 351-9830
0 votes Thank Flag Link Sat Feb 11, 2012
Tauami,
You have some good answers already, but I am a local realtor in the area and if you have any other questions, please feel free to call/email me.

DJ Bonner
Keller Williams Realty South Bay
djbonner@kw.com
562-572-4203
0 votes Thank Flag Link Sat Feb 11, 2012
What is teh law and what is ethical are different, landlords should notbe diverting rent money for their own use and not paying the mortgage but as far as teh law is concerened, it differs in every state whether there is fraud being committed. You need to seek a lawyers advice for dealing with the tenant and to decide whether to evict. Then you need a professional and well expereinced listing agent to work with your short sale. good luck
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Sat Feb 11, 2012
You should begin eviction proceedings immediately, and you should sue for the back rent, get a judgment, attach the tenants' wages if possible, and get a new tenant. Yours is a common story and I get so angry when I hear anyone, but especially realtors who know better, calling this 'bank fraud', it is absolutely NOT bank fraud. You own the property until the day the bank puts their name on the deed instead of yours, and as owner you are perfectly within your rights to rent the property and collect the rent.

Look, you did the right thing, you TRIED to work with the bank and it was, as is typically the case, the BANK that refused to be reasonable. What IS fraudulent is living in a rental property and refusing to pay the rent. Nobody gets to live anywhere for free, unless it's in a cardboard box in the park!

I don't know California law or resources, but if I were you I would either talk to an attorney or see if I could find some 'self help' through your courts or your Department of Community Affairs, get rid of this person, get the money owed you, and find a new tenant.
0 votes Thank Flag Link Sat Feb 11, 2012
the renter is (was) a friend and I never had him sign a contract, however verbal agreements are binding by my understanding and it was always agreed that he pay me a certain amount each month. I pay all the utilities too and was even losing $ on him some months when he paid little to nothing at all. In any case it will be hard for me to prove anything since he never made consistent payments and what little he would give here and there was in cash. If I sue the burden of proof I understand will be on me, and having no real proof that he wasnt paying I have to hope that he dosent lie under oath. In any case I'm told that the bank is due the rents if I'm not paying mortgage, but they rarely enforce that rule (I'm told its outlined somewhere in the fine print) and a sympathetic judge will rule in my favor- especially since I was repeatedly trying to modify the loan and stay in the house, never with a mindset to defraud. The renter however feels entitled to paying 1/2 or less since I'm not paying. And here I am, assuming all resposibility, ruining my credit, losing a 70k down payment, taxes, insurance, etc. Can you believe he should feel entitled not to pay?
0 votes Thank Flag Link Sat Feb 11, 2012
hi tsuami as a renter i appreciate your view as i am in a like situation. i have rented the same home for 8 years and my landlord stopped paying the mortgage months ago and waited until the last minute to inform me. i pay all utilities and the mantinace on this home including some major ones with the understanding that all he wanted was just the rent and thats it. in eight years he has never had to pay a dime now the neighborhood has gone to total heck with drug dealing open in the street. i have no written agreement or anything i have been paying but since he has no intention of ever keeping the property i feel very slighted. he even informed me that if there is a major problem like the hot water heater or a window that he will no longer put anything toward its repair. i have a wife with cancer and two small kids so i would like someone to tell me what i should do right now i cant get the money to move and keep paying to do whats right.
Flag Thu Aug 16, 2012
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