As previously mentioned on this Blog a new federal law protects tenants of foreclosed properties. The law requires the lender to honor the terms of bona fide leases after the lender takes back the property at foreclosure sale. At least one federal lender, “Freddie Mac” is offering to pay tenants to move out of properties after foreclosure. I received a letter from a law firm representing Freddie Mac addressed to the “unknown tenants” who leased and occupied a foreclosed house wherein Freddie Mac offered the tenants $4,000 cash to leave the property in 30 days. The proposed settlement required the tenants to deliver the property in broom clean condition. Freddie Mac offered to deliver a check payable to the occupants who sign the stipulation. Not only does the new tenant law protect tenants’ lease occupancy rights after foreclosure, but the federal government mortgage agencies are now paying tenants to move into another dwelling.
Making cash offers to unknown tenants is generous and also advantageous to the mortgage lender which wants quick control of the foreclosed property. The practice also invites abuse. A homeowner facing probable foreclosure could enter into bogus lease contracts with existing tenants, or even fake tenants, and then try to extract payments from lenders. Fake lease arrangements are certainly civil fraud and may also be criminal. Many borrowers lied on mortgage loan applications, and I suspect some will use misrepresentations to gain cash payments offered by lenders after foreclosure.