Posted on: 07th Jan, 2010 11:51 am
I'm trying to explain to my stubborn boyfriend that he can not collect rent from his renter when he is in default of his loan. Up until the banks served him foreclosure papers he collected the rent. The renter now knows what is going on because the banks are pushing him to put the house on the market. The renter put in a short sale offer, changed the locks on the house to not let anyone in and didn't pay the rent.
So my boyfriend thinks he can evict the guy. I worked for a hard money lender from 2005-2008 and know what goes down. I'm guessing when the bank served the papers to the address they asked who the renter was. The bank now knows and probably working with the renter doing an assignment.
It's very annoying when you know all this information and try to tell a stubborn man the truth and he doesn't listen. UGH
Am I way off here in that he can't evict him? I think he's going to try using the excuse that he violated the lease by changing the locks and not working with him to sell the house. That could be valid but he definitely does not deserve collecting rent from the guy.
Thanks in advance.
So my boyfriend thinks he can evict the guy. I worked for a hard money lender from 2005-2008 and know what goes down. I'm guessing when the bank served the papers to the address they asked who the renter was. The bank now knows and probably working with the renter doing an assignment.
It's very annoying when you know all this information and try to tell a stubborn man the truth and he doesn't listen. UGH
Am I way off here in that he can't evict him? I think he's going to try using the excuse that he violated the lease by changing the locks and not working with him to sell the house. That could be valid but he definitely does not deserve collecting rent from the guy.
Thanks in advance.
Hi Mokey,
It is not quite possible for your boyfriend to evict the renter from the property. He has defaulted on the mortgage and a foreclosure is imminent. After the lender forecloses the property, he will not be considered as a rightful owner and thus, will not have any right to evict the renter. Moreover, as you have mentioned, the lender is probably working with the renter on assignment of rent. If it is so, your boyfriend will not be able to collect rent from the renter.
It is not quite possible for your boyfriend to evict the renter from the property. He has defaulted on the mortgage and a foreclosure is imminent. After the lender forecloses the property, he will not be considered as a rightful owner and thus, will not have any right to evict the renter. Moreover, as you have mentioned, the lender is probably working with the renter on assignment of rent. If it is so, your boyfriend will not be able to collect rent from the renter.
is either of these two guys honorable?
until the foreclosure action is final, your b/f owns the home, and it seems to me he's well within his rights to evict this tenant who arbitrarily changed the locks. if that's not a violation of his lease, i'd be amazed.
the lender working with the tenant to work out a deal? if that's not unethical, i guess we'll have to redefine the word. i doubt it's happening, though i won'd but it past everyone to do it.
eviction makes sense, but it won't make much difference, inasmuch as your b/f is being foreclosed on anyway.
until the foreclosure action is final, your b/f owns the home, and it seems to me he's well within his rights to evict this tenant who arbitrarily changed the locks. if that's not a violation of his lease, i'd be amazed.
the lender working with the tenant to work out a deal? if that's not unethical, i guess we'll have to redefine the word. i doubt it's happening, though i won'd but it past everyone to do it.
eviction makes sense, but it won't make much difference, inasmuch as your b/f is being foreclosed on anyway.
George,
Assignment of rent is something fairly typical, some loans even have you sign a form up front acknowledging that they have the right to do it.
The basic gist of it is that you shouldn't collect rent on property when you're in default on your note. If you're not making you're payments, but you're collecting rent, then you're putting your renter at risk for future eviction and pocketing the money. It's immoral and in some cases can be illegal I believe.
As a result, when the bank finds out there is a paying renter, they will try to collect the rent directly and bypass the delinquent borrower.
On deeds of trust for Alaska Housing Finance Corporation, they make you acknowledge the fact right up front, so you can't later say you weren't aware of it.
I agree with you though that he could probably have a legal right to try and evict his renter, but I don't think a judge would look very favorably on the circumstances and it's probably a waste of time. Actually, it sounds like the foreclosure may already be a done deal, so in reality he has no rights unless he cures the defect, if that's possible.
I swear, I'm going to get a law degree next ... I feel like a lawyer standing before a judge every time I have a file in front of underwriting
Assignment of rent is something fairly typical, some loans even have you sign a form up front acknowledging that they have the right to do it.
The basic gist of it is that you shouldn't collect rent on property when you're in default on your note. If you're not making you're payments, but you're collecting rent, then you're putting your renter at risk for future eviction and pocketing the money. It's immoral and in some cases can be illegal I believe.
As a result, when the bank finds out there is a paying renter, they will try to collect the rent directly and bypass the delinquent borrower.
On deeds of trust for Alaska Housing Finance Corporation, they make you acknowledge the fact right up front, so you can't later say you weren't aware of it.
I agree with you though that he could probably have a legal right to try and evict his renter, but I don't think a judge would look very favorably on the circumstances and it's probably a waste of time. Actually, it sounds like the foreclosure may already be a done deal, so in reality he has no rights unless he cures the defect, if that's possible.
I swear, I'm going to get a law degree next ... I feel like a lawyer standing before a judge every time I have a file in front of underwriting
howard with the assignment - let me lean on your legal expertise here - you're referring to the possibility that lender and tenant are negotiating, right? i'd like for that to be my correct interpretation. if so, what i was thinking about that is that the poster has probably not assigned the rents, and that he is thinking they are trying to sidestep him in their negotiation. in other words, i think we have paranoia at play here.
anyway...is that what you're referring to when you bring up the possibility of an assignment of the rents?
thanks. i swear that underwriters have forgotten what got them where they are - they're all terrified, though often with good reason. i see that they get hammered now if something is awry.
anyway...is that what you're referring to when you bring up the possibility of an assignment of the rents?
thanks. i swear that underwriters have forgotten what got them where they are - they're all terrified, though often with good reason. i see that they get hammered now if something is awry.
First of all, I wouldn't say I have any "legal expertise", just a lot of experience and thoughtful analysis of what's happening.
Here's what I think has happened in this case. During the foreclosure process, the foreclosure representative most likely mailed the owner of record and also posted the foreclosure notice on the house itself. The renter noticed the foreclosure notice and contacted the number on it. During that contact, the renter expressed interest to purchase and the representative told them that they could explore that option. The rep probably also mentioned that under normal circumstances, they would have to move out during the foreclosure/auction process and couldn't move back in until they were the new owner. The renter of course doesn't like the sound of this, so they rekey the property hoping to hole up and avoid getting kicked out.
It's possible that during the original conversation, the foreclosure rep also requested that the renter pay his rent to them directly if they want to stay in the property. I just did a quick search and found this right on the mortgagefit website.
First of all, I wouldn't say I have any "legal expertise", just a lot of experience and thoughtful analysis of what's happening.
Here's what I think has happened in this case. During the foreclosure process, the foreclosure representative most likely mailed the owner of record and also posted the foreclosure notice on the house itself. The renter noticed the foreclosure notice and contacted the number on it. During that contact, the renter expressed interest to purchase and the representative told them that they could explore that option. The rep probably also mentioned that under normal circumstances, they would have to move out during the foreclosure/auction process and couldn't move back in until they were the new owner. The renter of course doesn't like the sound of this, so they rekey the property hoping to hole up and avoid getting kicked out.
It's possible that during the original conversation, the foreclosure rep also requested that the renter pay his rent to them directly if they want to stay in the property. I just did a quick search and found this right on the mortgagefit website.
"When you rent out a mortgaged property, you may have to sign over an Assignment of Rent agreement to the lender. By doing so, you authorize the lender to collect rent on your behalf if you default on the mortgage.
The Assignment of Rent provides an additional security to the lender in case you default on the loan. The lender will use the Assignment of Rent only when you default on the loan. Through this agreement, he will be able to collect rent payments on your behalf till the end of the lease period and recover the unpaid loan balance. Any extra cash collected by the lender will be returned to you. Once the debt is fully paid off, the assignment of rent will become null and void."
Here's what I think has happened in this case. During the foreclosure process, the foreclosure representative most likely mailed the owner of record and also posted the foreclosure notice on the house itself. The renter noticed the foreclosure notice and contacted the number on it. During that contact, the renter expressed interest to purchase and the representative told them that they could explore that option. The rep probably also mentioned that under normal circumstances, they would have to move out during the foreclosure/auction process and couldn't move back in until they were the new owner. The renter of course doesn't like the sound of this, so they rekey the property hoping to hole up and avoid getting kicked out.
It's possible that during the original conversation, the foreclosure rep also requested that the renter pay his rent to them directly if they want to stay in the property. I just did a quick search and found this right on the mortgagefit website.
First of all, I wouldn't say I have any "legal expertise", just a lot of experience and thoughtful analysis of what's happening.
Here's what I think has happened in this case. During the foreclosure process, the foreclosure representative most likely mailed the owner of record and also posted the foreclosure notice on the house itself. The renter noticed the foreclosure notice and contacted the number on it. During that contact, the renter expressed interest to purchase and the representative told them that they could explore that option. The rep probably also mentioned that under normal circumstances, they would have to move out during the foreclosure/auction process and couldn't move back in until they were the new owner. The renter of course doesn't like the sound of this, so they rekey the property hoping to hole up and avoid getting kicked out.
It's possible that during the original conversation, the foreclosure rep also requested that the renter pay his rent to them directly if they want to stay in the property. I just did a quick search and found this right on the mortgagefit website.
"When you rent out a mortgaged property, you may have to sign over an Assignment of Rent agreement to the lender. By doing so, you authorize the lender to collect rent on your behalf if you default on the mortgage.
The Assignment of Rent provides an additional security to the lender in case you default on the loan. The lender will use the Assignment of Rent only when you default on the loan. Through this agreement, he will be able to collect rent payments on your behalf till the end of the lease period and recover the unpaid loan balance. Any extra cash collected by the lender will be returned to you. Once the debt is fully paid off, the assignment of rent will become null and void."
Okay, that's me above, the forum won't keep me logged in ... hate that.
In response to the original poster. Your boyfriend is doing nothing wrong or illegal by collecting rent while he is in foreclosure. This happened to me once with my landlord and I asked a real estate attorney if my landlord could still collect rent and I was told he absolutely could because even though he is in foreclosure he is still the owner of the house until the bank takes over the house or sells it off in a short sale. Just because a owner is in foreclosure doesnt mean the tenant can live rent free.
Now the bank can always execute the assignment of rents clause and have the tenant pay the rent to them directly, but until/if that happens your bf can still collect rent until he is no longer legally the owner of the house.
Now the bank can always execute the assignment of rents clause and have the tenant pay the rent to them directly, but until/if that happens your bf can still collect rent until he is no longer legally the owner of the house.
you just have to be more active, howard. thanks for the speculative post - it was full of good information.
and "guest": even if you are howard again, thanks for adding your commentary as well.
all the dialogue we get on here is valuable.
and "guest": even if you are howard again, thanks for adding your commentary as well.
all the dialogue we get on here is valuable.
You're welcome George. I am not howard (Id log in if I could remember my un/pw hehe). I should have noted that in live in NYC and I know the law holds true in NYC regarding a landlord collecting rent while in foreclosure. I am not sure, but I believe the same law applies in most other states except for in California. From what I understand a landlord in California cannot collect rent if he/she foreclosures on a home inside the first year of purchase. After the 1 year is up they are free to do the same.
I was really stunned when my lawyer said it wasnt illegal. He also said its a classic stunt investors pull when the value of their properties plummet.
I was really stunned when my lawyer said it wasnt illegal. He also said its a classic stunt investors pull when the value of their properties plummet.
there's a spot where you can punch in your email address for a forgotten password; i suppose the email you get would also show your user name, too. try it, you might like it (sorry that just popped into my head).