Judith Watler is a landlord’s dream. She’s lived in Mattapan, a blue-collar Boston neighborhood, her entire life. She’s worked for the same healthcare company for 20 years. Her family rented their last apartment for 15 years until May, when they moved into a duplex blocks from the church where the Watlers married and their children were baptized.
But last fall, Mrs. Watler’s landlord defaulted on his mortgage and Deutsche Bank foreclosed on the building. Now, the bank wants her family out.
Nationwide, as many as 40 percent of families facing foreclosure-related evictions are renters, and stories like Watler’s are drawing fresh attention. Congress and 13 states are considering laws to protect responsible renters and prevent communities from the blight of abandoned buildings that are stripped even of their copper fittings by scavengers, driving down property values.
Earlier this month, Rep. Keith Ellison (D) of Minnesota introduced new legislation that would give tenants who rent on a month-to-month basis 90 days notice after a foreclosure before they have to leave their homes.
Likewise, Rhode Island and Nevada are considering laws that would give tenants more notice when their buildings enter foreclosure. Massachusetts and Connecticut are considering going further with so-called “just cause” eviction laws that allow tenants in good standing to stay in their foreclosed rental homes until they are sold at auction.
The problem is particularly acute in the Northeast, according to the National Low Income Housing Coalition. By their estimates more than 50 percent of foreclosure-related evictions in some Northeastern cities involve renters.
‘No copper left’
The result is most apparent in neighborhoods like Mattapan. Drug users now hang out in vacant buildings, and crime is rising. Watler says she worries when her kids walk even the short distance to the bus stop. “The longer these houses are empty, the more trouble it’s going to create,” she says.
The scene is similar in the west end of Providence, R.I. The streets of the predominantly minority neighborhood are studded with deserted and derelict buildings. Many have been on the market for more than a year. Some are intact, but most have broken windows and yards full of garbage and debris. One has a message written on its boarded-over door for would-be scavengers: “no copper left.”
A few blocks away at La Execelencia restaurant, employee Gracia Bello says business is way down. “It used to be full. Now there’s nobody,” she says, standing over a hot line of Dominican stews. On good days, the restaurant did about $700 a day in business, now it’s down to $150 a day, she adds.
Mabel Cabrera is one of the renters who might be forced to leave town. She’s facing eviction for the second time in two years – both times because banks foreclosed on her landlords. For several months after the first eviction, she and her three daughters shared a single rented room. Now in a larger apartment, that building has also entered foreclosure.
In mid-January, lawyers from HSBC Bank notified Ms. Cabrera that she had had 11 days to vacate the apartment.
As is often the case in such situations, the bank offered her “cash for keys”: $600 for leaving the apartment. But that won’t cover her moving costs, let alone the first month’s rent and security deposit for a new apartment, Cabrera says. In Providence, a typical two-bedroom apartment can cost $1,000 a month.
With the rest of her family in the Dominican Republic and her work hours at a cleaning company recently cut, Cabrera says she and her family will move to a homeless shelter if she is evicted.
To fight her eviction, Cabrera is working with the Rhode Island Bank Tenant Association and has written a letter to lawyers from HSBC Bank stating that she wants to remain in the apartment and pay rent. But the bank has not changed its policy, and Cabrera says a constable could come at any time and put her family’s belongings on the curb.
As her 13-year-old daughter does her homework at a desk surrounded by boxes and bags of the family’s possessions, Cabrera says, “The kids don’t understand. It’s so difficult to say to them, ‘We don’t have a house, but we have each other.’ ”
For her part, renter Watler does not understand the banks’ stance. “It just doesn’t make sense to me,” she says. “Why would [lenders] want these houses to just be abandoned?”
The answer is that evicting tenants is banks’ “default option,” says Alan Mallach of the Brookings Institution. But he, too, questions the wisdom of such a policy: “Not only in the sense that it’s bad for the community and the tenants. But it’s not in the lender’s best interest.”
How to stop the spiral
In New Haven, Conn., property values have declined by 50 to 90 percent in the neighborhoods hardest hit by foreclosure, says Amy Marx, a staff attorney with New Haven Legal Assistance, which works with many tenants of bank-owned buildings. She suggests that the best way to stop the downward spiral of property values is to let renters stay in their homes.
But lenders see vacating the buildings as a necessary step in getting the properties fixed up and resold, says Rick Simon, a spokesman for Bank of America. “We believe it’s better for the community to have the property prepared for resale as soon as possible,” he says. “It’s generally more effective to market a property that is vacant than one occupied by a tenant.”
Bank of America typically gives renters $2,000 in its cash-for-keys offers and gives them 60 days to vacate the premises before starting eviction proceedings, says Mr. Simon. He says the time frame gives tenants enough time to make new housing arrangements but also respects lenders’ desire to get the property on the market as soon as possible.
But these rules have drawn criticism from a number of community groups in Boston, including City Life/Vida Urbana. The group wants Bank of America to follow in the footsteps of Fannie Mae and Freddie Mac, which in recent months announced new policies that let tenants stay in their homes until the dwellings are sold at foreclosure.
Since the policies apply only to tenants of buildings owned by the two banks, their impact will be limited, but some housing advocates hope the policies will be a model for other lenders.
“Fannie and Freddie have shown us that it can be done,” says Ms. Marx. Her organization has asked eight of the nation’s largest mortgage lenders to enact similar policies. Their response, says Marx, has been consistent: The banks say they aren’t responsible for setting eviction policy; that responsibility lies with the mortgage-servicers who act on behalf of the investors who have bought the loans from the bank. “We view it as the bank’s responsibility to oversee the situation, and to be engaging in discussions with tenants and their legal advocates,” Marx says.
But there are signs of change. Community groups like City Life are raising awareness among renters. Weekly meetings of its bank tenants association draw more than 60 renters and former homeowners living in properties that are now bank-owned. Many of them meet with volunteer lawyers afterward.
City Life also canvasses neighborhoods to inform renters whose buildings have entered foreclosure. When negotiations with banks stall, the group stages eviction blockades, physically blocking constables from entering homes. Other bank tenants associations, modeled after City Life’s group, have recently formed in other Massachusetts cities and Rhode Island.
With more homes entering foreclosure as unemployment rises, the time for action is now, says Brenda Clement, executive director of the Housing Action Coalition of Rhode Island. Though most banks haven’t changed policies and legislative battles are ongoing, tenants are learning their rights and banks are showing more willingness to negotiate, she says.
“Last year, they wouldn’t even talk to me, but their whole world has changed so dramatically,” she adds. “Now, there’s a lot more willingness, at least to discuss, though we haven’t gotten a final resolution.”
Ayda Rivera of Providence is hopeful. Freddie Mac recently foreclosed on the single-family house she rents. But she and her lawyers are negotiating with the company to try to work out a rent-to-own arrangement. Renters in her community are “afraid, nervous, and panicking,” but she says there must be a solution.
“There are so many in this situation,” she says. “The government can’t just let all of us get thrown in the street.”