MyNewPlace Blog

On Monday we received urgent electronic correspondence from the National Multi Housing Council alerting its recipients to the May 7th passage of H.R. 1728 by the United States House of Representatives. Catalyzing this call to action were amendments added to the Mortgage Reform and Anti-Predatory Lending Act during floor debate “that could be used to prematurely force apartment properties into bankruptcy [and] unnecessarily alarming renter notification provisions [original emphasis preserved].

Sponsored by Representative Brad Miller (D-NC) with a title summary describing a reform to the Truth in Lending Act of 1968, which requires creditors to enumerate clearly all credit costs and how they were tabulated, such as risk calculations and other cost variables (attempting to legally replacing “caveat emptor" with “let the seller disclose" for credit arrangements), to provide accountability in consumer mortgage practices.

Representative Miller's chief reason for this reform was to eliminate the situation wherein mortgage brokers can profit from offering single-family home loans to people who may not be able to afford them; this contradiction has been popularly identified as one of the cornerstones to dismantling a complex capitalist system.

Here is some CSPAN footage of the Congressman speaking on behalf of his legislation:

However, as tends to happen in the halls of Congress, amendments were added during floor debate outside the scope of the original bill, and these additions may cause serious problems in the apartment sector, a forced foreclosure mechanism and an overly broad renter notification requirement.

According to the NMHC, Representative Nydia Velazquez (D-NY) successfully proposed an amendment that would allow HUD and the Treasury Department to determine if a multifamily property were “at risk" and in such cases where this classification was levied, the two agencies would foreclose on the properties and then sell them to an entity which would then convert the properties into affordable housing. This sounds a bit like giving HUD an eminent domain authority; HUD could identify a rental property as “at risk" based on indefinite criteria and then the agency itself would employ the use of that property under a given municipalities public housing administration.

The other amendment successfully added during floor debate by Representative Bob Filner (D-CA), would require that apartment owners notify current or prospective renters whenever a property is in default or foreclosure.

Now, the NMHC regards this as unnecessarily alarmist because the amendment, in its crusade to protect the renter, failed to cope adequately with the fact that multifamily foreclosures are often temporary and non-monetary; this oversight is certainly understandable, as the term “foreclosure" has been adopted into the popular parlance from the single-family cause of an owner defaulting on a loan agreement and the final result of the bank repossessing the home. The NMHC contends that this amendment is dangerous because it may put stress on otherwise soundly functioning rental property and unnecessary because state law protects renters from being evicted.

However, we have done some research on multifamily foreclosures in the past and have come across some different information that may be useful in amending amendments.

First, according to the National Law Center on Homelessness and Poverty's report, Without Just Cause: 50-State Review of the (Lack of) Rights of Tenants in Foreclosure, renters are protected by state law to varying degrees. The report's summary declares that “in a majority of states, a renter's tenancy would be automatically terminated following a foreclosure on the property. However, the circumstances that allow tenancy to be terminated vary greatly from state to state."

Second, in many cases, it is the property management staff that is affected adversely. Property managers continued to show up to work without getting paid, and not receiving any notification whatsoever. If an amendment is added, then it should extend not only to residents, but also to property staff.

The legislation is, according to MyNewPlace's Congressional sources, expected to pass through the Senate without much trouble and is currently awaiting a vote in the Senate Committee on Banking, Housing and Urban Affairs before it hits the Senate floor.

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