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Protecting Tenants at Foreclosure Act (PTFA)

The NARPM® Government Affairs Committee has prepared the following summary of the Protecting Tenants at Foreclosure Act of 2009 to help educate NARPM® members about this new law. This is not a legal interpretation of the Act, but rather a general guide to help you understand more about how the law protects tenants when a property owner falls into foreclosure. The Act was designed to be silent on several issues which means you will need to refer to your state law for further clarification. We highly encourage you to consult an attorney if you have any questions.

If you are working with a tenant who is facing a foreclosure situation, we suggest you encourage them to speak with a HUD-approved housing counselor. These counselors are trained to provide helpful advice at no cost and can be located on HUD's website by clicking here.

The “Helping Families Save Their Home Act of 2009” (S.896) went into effect on May 20, 2009, and included the “Protecting Tenants at Foreclosure Act” (PTFA), as well as amendments to Section 8 of the “United States Housing Act of 1937.” Both portions of the bill establish new Federal protections for tenants living in properties that go into foreclosure. This law preempts current state laws except where a state’s law provides stronger protections for the tenant. The PTFA included a sunset clause which scheduled this law to expire on December 31, 2012.

Effective May 20th, tenants with a “bona fide” lease that was entered into before notice of foreclosure can remain in a foreclosed home until the end of their lease, unless the bank sells the property to someone who intends to make it his/her primary residence. If the new owner intends to occupy the home, they are still required to give 90-days notice to the tenant prior to eviction. If the tenant does not have a lease (month-to-month) or current state law allows the lease to be terminated at will, there is still a 90-day notice requirement prior to eviction. Notice must be provided by the “immediate successor in interest” which, in most cases, would be the bank or the new owner.

A “bona fide” lease is defined in the law as one that:

  • (1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant;
  • (2) the lease or tenancy was the result of an arms-length transaction; and
  • (3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit's rent is reduced or subsidized due to a Federal, State, or local subsidy.

Legislation to Extend PTFA Sunset Date to 2014 (7-21-10)

The Dodd-Frank Wall Street Reform and Consumer Protections Act (H.R. 4173) has passed the House and Senate, and is likely to be signed by President Obama this week. Among other changes, in Section 1484, the bill includes a two-year extension of the PTFA sunset date, clarifies that the date of notice of foreclosure is the date complete title is transferred to the successor, and directs the Secretary of HUD to develop a grant program for legal assistance to low and moderate income homeowners/tenants who are dealing with foreclosure issues.

PTFA Resources

  • Full version of the Protecting Tenants at Foreclosure Act
  • PTFA Conference Call Forum Audio – August 2009
    The Center for Housing Policy hosted a conference call forum in August of 2009 regarding the PTFA which featured Catherine Bendor of the National Law Center on Homelessness & Poverty, Danna Fischer of the National Low Income Housing Coalition, and David Rammler of the National Housing Law Project. The 30-minute call briefly covered the legislative history of the provisions, the meaning of the law, and the impact of the provisions on state and local laws and practices. The audio from this forum has now been posted to their website and can be accessed by clicking here (MP3). After the call there was an online Q&A session; click here to see how the panelists responded to questions.
  • HUD Notice Explaining PTFA – June 2009
    In June of 2009, HUD submitted a notice in the Federal Register to help explain the new tenant protections and discuss the responsibilities of the immediate successor in interest.
  • Housing Wire article on PTFA extension: 7-21-10