Again, talk to a lawyer. You don’t know what the landlord will do, or has been doing. He may have stopped making payments months ago, and the bank is about foreclose. You don’t have any way of knowing that the landlord is entitled to rent to you, or that you are guaranteed a room for the period covered by your rent. You also need to establish that you have a legitimate right to live there, and that your posessions are protected. The laws are going to vary depending on where you live. You may also find free legal services in your locality available.
Much of this depends on what state the OP lives in.
More depends on the landlord/friend’s prior mortgage payment history. The lender may choose to “revert” any additional payments he made to cover the payments he won’t be making in the future. If he paid extra every month, it might be years before he actually defaults, assuming he’s not cooperating in a short sale or something.
At any rate, under no circumstances should you (OP) be paying anything more than a month’s rent in advance. If you paid the last month’s rent in advance, tell your friend you’re skipping a month (or to give it back).
From personal experience when one of my landlords lost the house to foreclosure. It was Arizona, but the law was Federal and I assume still on the books.
A lease is a contract and if the house is lost to foreclosure, the new owner must still abide by the lease. Also written into the law was certain minimums of time and whatnot. We got a sweetheart deal from the new owner to move out earlier so they could sell the house but he went through an attorney and had to sign a new lease to make it legal.
First of all, do you have a lease or is it a handshake deal?
Second, talk to a attorney to see if the law that applied to me is still on the books. Plus I would assume a lease on a room would be the same as a lease on a house legally but since when did tenant/landlord law make any sense?
Third, start packing because eventually you will have to move. Don’t count on the new owner renewing your lease and if you don’t have a lease, the attorney in step 2 should tell you the minimum amount of time you’ll have.
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Your friend can sign the mortgage over to you. You’ll assume the mortgage and any equity in the house. Potentially that could be several thousand dollars in equity.
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People with equity in their house do not give it up in foreclosure.
Very few mortgages are assumable. Could the person make payments through an agreement with the current homeowner and “own” the house. Technically yes, but it takes a fair amount of cash on-hand to do, someone knowledgable in the process (hard to find) and basically you are paying the mortgage (probaly a big one refinanced at the top of the bubble) for someone else’s house.
The law is still on the books; it was only signed in 2009. The renter gets to stay for the balance of the lease unless the new owner intends to occupy the premises, and then he gets 90 days to vacate from the date the foreclosure or short sale actually occurs.
This requires a bona fide lease, though; a guy renting a room from his friend may not constitute a bona fide tenant even with a written lease.
All mortgages are assumable, subject to qualification for FHA mortgages. All that’s required is for both parties to agree. Getting the lender to agree may be difficult or impossible, of course.
ETA: I agree in principle that a mortgage somebody is walking away from is almost certainly not one you want to take over, though.
And that is why I put in the caveat that you need someone knowledgable. I had 3 people that “specialize” in this sort of deal tell me that loans are not assumable. One waited until I found the house that wanted to charge $8000 in fees + the down to make the deal. :eek:
So if the buyer and the seller work out a assumption of the loan and the bank says no, then what happens?
No deal.
By “both parties”, I mean the original borrower and the lender, not the original borrower and the prospective one. I should have said all three parties - sorry for any confusion.
Still, the question is - do all these laws apply if you are renting a room in a house? Most such laws I recall only apply if you are rentling the entire house not a part of it.
The Protecting Tenants At Foreclosure Act doesn’t appear to require the tenant to be remaining the entire property, as it refers to “any residential real property”.
Hmmm… so you can royally screw over the bank by signing a long-term lease with Joe Schmoe to live in your basement for a pretty cheap rent? Even government law-makers are not that stupid, I hope… If this were the case, I suspect the dodge would be all over the internet b now. Sublease your house to your buddy Fred for $1 a month on a 10-year lease, and then sublease from him and keep living in it while the bank spins its wheels…
The law requires market rate rent for protection.
Is there a bona fide lease?
Until the foreclosure happens, the landlord is entitled to rent. If you don’t pay, you risk an eviction action. Paying rent now may also help prove a bona fide arms length lease later on, if there actually is one to prove up. See if you can have a title company, attorney, realtor, etc. check the public records to make sure the landlrod is still the owner before paying the rent.
True, though if the equity is small enough it may not be worth the hassle of servicing the loan long enough to sell the place. Say your house is worth 200K and you owe 190K, and your mortgage is 1,000 a month. By the time you pay a realtor 6% to sell it for the 200,000, you’ve spent 12,000 to sell the place.. leaving you 2,000 in the hole (and that doesn’t even cover the fix-up-to-sell costs or the mortgage cost).
Agreed that few mortgages are assumable. Maybe FHA and VA loans might be. Depending on circumstances, a bank might be willing to work with you especially since it would mean less hassle. Or the OP might even be able to get a new mortgage in his own name. This all assumes the OP can or wants to do this. I suspect not.
I’d be leery about doing anything that left the current homeowner financially involved in the house, like having the current owner still the owner of record. Doing a title transfer without telling the mortgage holder could trigger the due-on-sale clause, as well.
The landlord could certainly evict the OP for nonpayment (though I think it’s a fairly shitty thing to do in the circumstances).. Of course, since it’s a friend situation, and the landlord/friend is about to quit paying the mortgage, I suspect he would NOT do so.
Depending on your agreement and where you live, you may be a lodger and not a tenant. YMMV.
Where did **Mole **- the original OP go?
S/he posted this almost 4 days ago andf hasn’t been back…
Must have been evicted.
[QUOTE=md2000]
Hmmm… so you can royally screw over the bank by signing a long-term lease with Joe Schmoe to live in your basement for a pretty cheap rent? Even government law-makers are not that stupid, I hope… If this were the case, I suspect the dodge would be all over the internet b now. Sublease your house to your buddy Fred for $1 a month on a 10-year lease, and then sublease from him and keep living in it while the bank spins its wheels…
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There’s a link to the statute in post 24, which includes a “bona fide tenant” definition. That includes a requirement based on market rate.
An option might be to do it this way…
a) Find out how much is outstanding on the loan as of right now
b) Draw up an “option to purchase” for this price at any point within the next ten years
c) Don’t tell the bank
d) Pay the mortgage directly to the bank yourself,
e) have the money that is paid to the bank lower the (eventual) purchase price of the house.
I would have thought this would be pretty simple to arrange?
Why?
- The home owner doesn’t have the hassle of the foreclosure, or the hit on his credit score
- Mole gets a house he presumably otherwise wouldn’t qualify for
- Friends get to help each other out
- The house may, or may not be a long way underwater, or just marginally unservicable - this one we cannot know
You left out step (f), get fucked when your friend realizes you paid for his house and he gets to keep it.
Nope - a competent laywer will cover that under step “b”. An option to purchase payable in monthly installments equal to the mortgage, paid directly to the bank or something similair - of course not risk free, but still…
A “competent lawyer” will tell you that you can’t sign away interest in your property without notifying existing lienholders. That means you have to tell the bank, and if you don’t your carefully worded “option to purchase” is almost certainly going to be held unenforceable.
You could probably get your money back in court- unjust enrichment (?)- but it’s still not a good idea.