Friday, July 11, 2008

Tenants and Evictions in Sacramento

Sometimes I wonder why I bother to read the local newspaper. Stories like this leave me fuming. Really, how hard is it to explain that tenants who are evicted as a result of foreclosures have to receive notice (now 60 days) and be evicted through a court process? See, I just did it in a sentence. But if you read Jim Wasserman's article in The Sacramento Bee, you'd think that tenants who didn't take the lender's meager "cash for keys" offer would be put out by the Sheriff within days. But given that the real estate industry is promoting the same misinformation (see this), I guess I shouldn't be surprised. And the Bee has provided a lot more help to owners (including landlords) facing foreclosure. Pay particular attention to the sidebar, where the realtor interviewed suggests that owners on the way out could rent out the property. But what else should we expect from McClatchy, which bought a bunch of papers in growing (read: bubble) markets and now has to make the best of it.

2 comments:

Polar said...

Fair enough on legal process and praying on the fears of the uninformed, but at least from a theoretical standpoint, the practice of cash for keys makes a great deal of sense.

Imagine such a scenario (which I am sure is the case in a vast majority of situations these days): homeowner, delinquent on payments, pretty much resigned to the fact that they will lose their homes via foreclosure; bank, understands the same, realizes that foreclosure process takes time, during which they fail to collect payments of principal or interest (and have to in turn pay interest on the deposits or senior debt that support the loan). For both parties, it is a superior solution to reach an out of court settlement, where the bank pays a tenant to voluntarily leave. Tenant receives cash. Bank avoids the higher cost of foreclosure and the potential damage to the property due to an angry evicted individual.

Fully concede that this does not cover every case, but lets be honest, given the circumstances, a 60 day notice period and court process is just going to extend the pain for the soon to be ex-homeowner and the bank. And, as much as you or I may want banks to eat their just desserts, the truth is that for the housing market to stabilize, we need both notional housing prices to fall back to levels that are consistent with the average gross income earned in each geographic area, but also for banks to have the remaining capital to provide mortgage finance to allow potential homeowners to take out mortgages.

And PLEASE do not tell me that is the role of Fannie and Freddie. They are such a big cause of this whole mess that it is not even funny to jest about such an idea.

PeonInChief said...

Uh, Polar, the 60-days notice applies to tenants who rented from foreclosed landlords.