HUD issued a notice, “Protecting Tenants at Foreclosure Act: Additional Guidance on Notification Responsibilities under the Act with respect to Occupied Conveyance,” on March 15.
Typically, the Federal Housing Administration (FHA) requires that an FHA-insured property be vacant when it is conveyed to FHA after a foreclosure. FHA does allow for the occupied conveyance of properties in certain limited cases, such as when the individual residing in the property suffers from a temporary, permanent, or long-term illness or injury that would be aggravated by the process of moving from the property, or when State or local law prohibits the eviction of a tenant who is making regular monthly payments to the mortgagor (see Memo, 10/29/2010).
When the federal Protecting Tenants at Foreclosure Act (PTFA) was enacted in May 2009, many stakeholders were unclear how the rights afforded to tenants under the PTFA would interact with the FHA occupied conveyance regulations. To address and clarify the relationship between the occupied conveyance regulations and the PTFA, HUD issued guidance on October 28, 2010. The March 15 guidance aims to provide further clarification between FHA regulations and tenants rights under the PTFA.
The March 15 notice reaffirms that mortgagees must comply with the PFTA. The notice states “before completion of foreclosure, the mortgagee must confirm the identity of all occupants, determine each occupant’s possible rights for continued occupancy under the PTFA and state or local law, and attempt to obtain documentation of existing leases and tenancies.”
The notice provides a sample “Notice to occupants of pending acquisition” (NOPA) that provides notice of a possible conveyance, and a summary of conditions when a tenant may have the right to stay in the property under the occupied conveyance regulations. The notice requires that mortgagees begin to use an updated NOPA, that is in compliance with the PTFA, state, or local law, by July 1.
If it is determined that occupied conveyance does not apply, the mortgagee is required to determine if the PTFA, state, or local protections apply, and comply with all relevant laws.
Advocates will continue to work with FHA to ensure that future notices regarding the occupied conveyance clearly inform tenants of their rights under the PTFA.
The notice is available at: http://www.ofr.gov/OFRUpload/OFRData/2012-06297_PI.pdf