Legislation You Should Know About

Hear what Lisa Blackwell, vice president, housing policy, at the Washington, D.C.-based National Multi Housing Council (NMHC), has to say about current legislation affecting the multi-family housing industry:

“President Obama recently signed mortgage reform and foreclosure prevention legislation (PL 111-22) that includes provisions protecting renters of properties facing foreclosure. The new law requires the purchaser of a foreclosed property to give renters a 90-day pre-eviction notice. It also allows renters to remain in the property until the end of their leases, unless the purchaser occupies the property as a primary residence, in which case the owner would be required to give a 90-day notice. The bill also requires the “immediate successor in interest” of a foreclosed property to assume any existing Section 8 housing assistance payment contracts and allow Section 8 renters to remain in place for the term of the lease.

“NMHC opposed the Section 8 provisions in Congressional testimony in April, arguing that new owners should not be subject to a contract agreed to by a previous owner and that imposing additional constraints on the apartment sector would discourage investment in rental housing and prevent foreclosed apartment properties from quickly and easily moving to new owners. The renter protection provisions of the law became effective May 20, 2009, immediately upon enactment. None of these provisions preempt more protective state and local laws. All of the renter protection provisions expire at the end of 2012.

“Also, in reaction to the foreclosure crisis in single-family housing and condominiums, the U.S. House of Representatives approved mortgage reform legislation in May that, unfortunately, includes provisions of serious concern to the apartment sector that could be used to prematurely force properties into bankruptcy and then sell them at a lower price to an entity that guarantees to convert them to affordable housing. During floor debate on the Mortgage Reform and Anti-Predatory Lending Act of 2009 (HR 1728), lawmakers approved an amendment proposed by Rep. Nydia Velazquez (D-NY) that would allow the government to intervene when an apartment property is delinquent, at risk of default, at risk of disinvestment, or in foreclosure. 

“Specifically, the amendment directs HUD and the Treasury Department to work together to create a loan modification program for at-risk multi-family properties. The bill doesn’t target any specific level of mortgage distress, property condition, or occupancy level, but gives the government latitude as to when it can intervene. 

“Properties could be subject to government intervention, including, but not limited to, restructuring the existing mortgage through interest rate or principal reductions or other action, transferring of the property through foreclosure or deed-in-lieu-of-foreclosure, or a combination of actions to restructure the debt and ownership transfer. 

“In separate action, Rep. Bob Filner (D-CA) successfully attached an amendment to the measure that would require apartment owners to notify current or prospective renters whenever a property is in default or foreclosure. Importantly, the amendment doesn’t limit this requirement to monetary defaults, and thus would include non-monetary defaults, which are often quickly remedied. 

“Although we successfully secured some modifications to the forced foreclosure amendment, it remains extremely onerous and we’re aggressively opposing it. If enacted, not only would it violate the property rights of existing owners, but it also threatens to severely curtail lending in the apartment sector.

“We’re also educating elected officials that the ill-advised notification language will unduly alarm residents and may, in fact, trigger a foreclosure or financial stress on a property by discouraging existing residents from renewing their leases and prospective residents from signing a lease. Moreover, the language is not only damaging, but unnecessary, as state laws already ensure an orderly transfer of ownership in the case of an apartment property foreclosure.

From: https://www.buildings.com