The Protecting Tenants at Foreclosure Act (PTFA) of 2009 required that owners acquiring property through foreclosure (ie banks) honor existing leases. Tenants with term leases could not be evicted until the end of their lease terms and not without a 90-day notice. That is, unless the new owner planned to occupy the primary residence, in which case they could terminate the lease with a 90-day notice. The act also provided additional protections for Section 8 tenants.
That legislation was extended through December 31, 2014. Unfortunately, Congress has not, as yet, done anything to extend that tenant protection into 2015.
Therefore tenants in properties in foreclosure need to look at state and local laws for guidance on tenant evictions involving foreclosures.
According to a recent National Mortgage News article, Wells Fargo said it will no longer follow the guidelines of the expired law. JP Morgan Chase, Citigroup and Nationstar have said they will voluntarily continue to follow the PTFA rules. Both Fannie Mae and Freddie Mac are supposed to continue to follow the expired law for their REO inventories.
Very few states offer the same protections for tenants as the expired federal law and 17 states have no specific tenant protections in foreclosure situations, allowing the banks/other new owners to immediately evict tenants following a foreclosure sale. In many states a foreclosure terminates the rights of tenants, so without the expired federal law, the new owner does not have to file a separate eviction notice to remove tenants in the property.
Anyone currently renting a property in foreclosure should pay close attention to these changes.