Since May 2009 the Protecting Tenants at Foreclosure Act (PTAF) has required purchasers of foreclosed properties (usually the lender) to assume the leases of tenants residing in the property. Tenants without leases must be given at least 90 days notice to vacate.
This law was passed to address the plight of renters who were being evicted due to the actions of their landlords. Tenants in good standing were being evicted by lenders eager to put to property back on the market.
The Neighborhood Stabilization Program (NSP) is a federal program for “the purpose of assisting in the redevelopment of abandoned and foreclosed homes.” NSP is funded through the Housing and Econoimic Recovery Act of 2008 (HERA) and the American Recovery and Reinvestment Act of 2009 (ARRA). NSP funds are generally used by grantees to purchase foreclosed properties from lenders. The grantees then redevelop or demolish and landbank the properties.
Unfortunately, multiple sources have documented that lenders are regularly ignoring the tenant protection requirements of PTAF. See: Violations of the Federal Protecting Tenants at Foreclosure Act and “Fannie, Freddie, Task Forces Ignore New Tenant Law.
This in turn, affects the NSP program, as NSP funds may not be used to purchase a property for which the grantee knows the initial purchaser failed to provide the NSP tenant protection requirements.
This has resulted in a standoff between NSP recipients nationwide, including here in Texas. NSP recipients have asked Lenders selling foreclosed homes to certify that they have complied with the tenant protection requirements of PTAF. Most lenders are refusing to do so. Notably, neither Fannie Mae, which acquired 145,617 foreclosed homes in 2009, nor FHA, which acquired 75,000, are willing to certify that they complied with the law.
NSP Grantees Should Not be Complicit in Illegal Foreclosure Activity
Some NSP recipients, under pressure to spend NSP funds before statutory deadlines, may be tempted to purchase uncertified homes. They may argue that as long as they have no proof that PTAF was not violated, they are allowed to use NSP funds to purchase the home.
This argument violates the spirit and intent of the law. If Fannie, FHA, and other lenders began following PTAF today, new foreclosures would soon provide enough certified homes to fulfill the needs of all NSP Grantees. We calculate that these two lenders alone could provide enough certified homes to use the nationally budgeted NSP funds in five months, or by this July.
In short, there is no reason that NSP Grantees should give NSP funds to lenders who are not willing to follow the law. We applaud the state of Texas for standing firm on the PTAF certification requirement, and call on all NSP grantees to follow suit. Allowing lenders to avoid certifying their compliance with the law is acting to be complicit with the lender’s failure to follow the law.
 New Haven Legal Assistance Association, Violations of the Federal Protecting Tenants at Foreclosure Act, 12/2009
 Doggett, Robert “Fannie, Freddie, Task Forces Ignore New Tenant Law,” ForeclosureBuzz.org 9/10/2009
 Personal correspondence with Michael Lyttle, TDHCA, 2/24/10; National Foreclosure Prevention and Neighborhood Stabilization Task Force March 3, 2010.
 One notable exception is Wells Fargo, which has agreed to certify its compliance.
 Fanne Mae 2009 10K SEC filing; Andrew Jakabovics “An Untapped Source of Green Rental Homes” Center for American Progress, February 2010; Personal correspondence with Michael Lyttle, TDHCA, 2/24/10.
 This calculation assumes all states have a per-home budget similar to Texas.