Wave of Foreclosures Hits Renters

RISMEDIA, Oct. 30, 2007-(MCT)-When Jennifer Barger’s household of seven rented a new house in New Prague, Minnesota, last June, she hoped the local schools would be a boon for her stepchildren.

But now that the family has settled in, it may get uprooted again. Barger got notice earlier this month that the house is being sold in a sheriff’s foreclosure sale in November. She’s hoping the family can remain for six months after the sale. Meanwhile, she said, she’s not sure who is rightfully due her rent. And she fears the effect another move might have.

“We were trying to better ourselves and better our kids’ lives,” she said “I’m extremely mad.”

Barger’s situation illustrates the trickle-down effects from Minnesota’s wave of foreclosures, as the financial troubles of rental property owners descend on renters. As people scramble for new homes, an unexpected increase in homelessness has agencies working to document how much is due to foreclosures.

Metrowide numbers are hard to come by, but at least 2,500 tenant households are expected to be disrupted by foreclosures in Hennepin County alone this year, according to a county task force. Hennepin accounted for about 27% of the state’s foreclosures over the last two years.

Renters caught in foreclosure come from a wide range of situations.

Elizabeth Eide, 27, and her husband, Chris, 32, learned about three weeks ago that their house in Albertville was in foreclosure. They had been renting for $1,350 a month since February and were hoping to buy it.

“It is really disappointing,” said Elizabeth Eide, an executive assistant to a management consulting firm. “It’s frustrating being a tenant and knowing your house is being foreclosed and there is nothing you can do.” Her husband has a snow-removal and lawn-care business with his father. They have three children.

With financial help from her parents, the Eides are trying to buy a house in nearby Otsego, Minn., that is close to foreclosure itself. The owner of that house paid $407,000 for it, she said, and they may get it for $210,000.

Tania Book, a single mother, said she learned about a month ago that her St. Paul duplex was to be sold at a sheriff’s foreclosure auction on Oct. 11.

She said she contacted the owners and was told that she could stay for free for three months before the foreclosure was finalized, saving $800 a month rent. But she has since learned that the heat will be shut off on Nov. 1, unless she and the upstairs tenant pay the monthly natural gas bill from Xcel Energy, which runs $300 to $500.

“I am devastated,” Book said. “This has been my security for four years for me and my two small children. … I don’t know what I am going to do. I am very stressed out.” Ironically, Book is working as a property manager for apartment buildings while she studies to become a police officer.

Low-income renters hit hard

“People don’t think of low-income families in apartments being hurt by the mortgage crisis,” said the Rev. John Estrem, CEO of Catholic Charities. “But in many ways, they are the most vulnerable — and the least to blame when they get tossed out.”

Some are able to find other low-rent apartments, but others do not.

Homeless families increasingly are seeking emergency shelter at places like the Dorothy Day Center in St. Paul. It normally serves up to 150 single people nightly but in September gave emergency shelter to a record 88 families. For the first nine months 458 families have stayed there, nearly as many as in all of 2006.

“How many of them are homeless because of apartment foreclosures? We don’t have hard numbers,” Bergland said. “At this point, we just know it’s happening.”

Nationally, the connection is clear. “Foreclosure is causing a significant increase in homelessness within our network all across the country,” said Jane Stensen, senior director for human services at Catholic Charities USA, the nation’s largest private network of social service agencies, based in Arlington, Va. “It’s really become apparent this year, and it’s growing.”

Shelter use by families traditionally rises during the summer and drops as cold weather arrives. “I’m not sure that we’ll see a big drop this year,” Estrem said. “The foreclosures don’t seem to be ending.”

Concerns about tenant rights

So concerned are officials about the effects of foreclosures on homelessness that the Minnesota Housing Finance Agency called in providers from Ramsey and Hennepin counties earlier this month to try to get a handle on the problem.

Laura Kadwell, the state’s homelessness director, said the state agency is developing a questionnaire that workers can give to homeless people seeking shelter to better pinpoint the effects of foreclosures.

The Hennepin County task force on foreclosures has a series of recommendations to help tenants. A major one is: Know your rights.

“They really are innocent bystanders with this,” said Julianne Ortman, finance director for the County Sheriff’s Office.

The Sheriff’s Office is starting to develop a rights fact sheet for renters that can be delivered when they get notice of a sheriff’s sale. But it will take a change in state law to require civil servers, who deliver most of the sale notices, to give renters more than the official notice.

“A lot of the time that notice is not the most informative to a tenant,” said Larry McDonough, managing director for housing at Legal Aid Society of Minneapolis.

“Some people think that it’s an eviction and they need to move before the sheriff’s sale, which would be a violation of the lease,” McDonough said. “The tenant might be thinking, ‘I don’t need to pay my rent,’ and they might be looking at an eviction notice.”

Some tenants decide to hold their money for a damage deposit and rent on their next place. Others break their leases and leave. When the Star Tribune knocked this week on the doors of 17 north Minneapolis rental properties that were foreclosed on last month, it found few occupied.

State agencies and charitable organizations hope that their efforts to pinpoint the effects of foreclosure will help them better prepare for a likely increase in demand from displaced families. They also hope to find out if they should be lobbying for more help for apartment owners facing foreclosure.

“If there’s a reasonable way to help those owners, we can have a direct impact on homelessness, here and around the country,” said Tracy Bergland, Catholic Charities director of housing.

Real Estate Hot Topics

Profit Center: Real Estate Tips, Training & Events

RISMedia Solutions

RISMedia on the Go

Today's Featured Listing