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RealtyTrac Inc., an online data tracker, is capitalizing on its database of foreclosure properties to give tenants advance notice of potential problems with their rental properties. The Irvine, CA-based firm just created RealtyTrac Rental Alerts, a subscription service that promises to warn tenants about pending foreclosure actions on specific properties.

The impact of foreclosure on residential tenants is a complex issue that varies from state to state, and, often, by location within states. In addition, the potential rights of those tenants to remain in a single or multifamily property after foreclosure can create significant issues for property managers as well as real estate investors who may be interested in buying it, experts concur.

RealtyTrac, which collects and aggregates foreclosure data nationwide, claims to have nearly 1.8 million foreclosure and bank-owned properties in its database. It plans to leverage that database to alert tenants by email if properties they are renting go into default or at risk of foreclosure. The service costs $24.95 a year.

Senior vice president Rick Sharga described the service as an “early warning system,” explaining, “Unexpected evictions are becoming an all-too-familiar scenario for good tenants who pay their rent on time. Some landlords aren’t paying their mortgages–even while their tenants are paying their rent faithfully–causing the tenants to be evicted without warning.”

Whether tenants have any recourse against their landlord when a rental property is foreclosed depends on the type of rental agreement they signed and what the landlord knew at the time of the signing.

One in nine mortgages is delinquent or in foreclosure, according to the Mortgage Bankers Association. In the fourth quarter 2008, the MBA reports, 7.9% of one-to-four family mortgages were delinquent, another 3.3% were in foreclosure and the share of new mortgages going into foreclosure remained at a record high of 1.1%.

Without Just Cause, a study released earlier this year by the National Low Income Housing Coalition (NLIHC) and the National Law Center on Homelessness & Poverty (NLCHP), found:

  • Only 33% of states–17 states–require any type of notice to tenants;
  • Only 29% of states–14 and DC–require a judicial process for foreclosure;

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