Ammone Phavone didn't understand why a sheriff's deputy was on her doorstep with an eviction order. She scurried inside to get her lease. She told him she'd always paid her rent.
Unfortunately, the landlords hadn't paid the mortgage. They'd lost the Baltimore rowhouse to foreclosure months earlier, and now the lender - finally able to take official possession - was making sure it was empty. A real estate agent acting as the lender's representative was just as surprised to find Phavone there last month as she was to hear that she'd have to leave.
"I cannot move out today," she said, standing on her doorstep, clutching her lease.
More and more renters like Phavone are unexpected casualties of the housing bubble's bursting, which has reverberated through the economy, putting a lid on consumer spending, stagnating sales and sending foreclosures soaring. Regular homeowners aren't the only ones defaulting on their loans - landlords are, too, and it's their tenants who end up ousted from the homes. And since they aren't part of the foreclosure process, renters often have very little warning that they must find another place to live.
"We run into a lot where the owners, they're not communicating with the tenants," said Deputy Andre Saunders with the Baltimore City Sheriff's Office.
While such cases have always existed, the excesses of the housing boom laid the foundation for the run-up in the number of displaced renters. Lured by fast-rising prices and easy mortgages, real estate investors and speculators snapped up properties in unprecedented numbers across the country and descended on Baltimore in particular. Seventy percent of city home sales in 2005 went to "non-owner-occupiers," according to state assessment records. Even in the first half of 2006, as the housing market was rapidly cooling, most city buyers were investors.
Many were neophytes who planned to rehab and quickly resell. They turned to renting when the slumping market made Plan A difficult - and some found Plan B worked no better, never mind if they found reliable tenants. Rent money didn't stretch far enough to cover expenses and keep up with loan payments, or they were juggling too many houses.
"They might be taking that money for another property that they're losing money on or they're rehabbing," said Alan Chantker, president of the Mid-Atlantic Real Estate Investors Association. He figures he gets a call every other week or so from a foreclosure-displaced tenant in search of housing, even though he's not involved in the rental side of the business.
Foreclosure cases topped 10,000 in the Baltimore metro area last year, up 50 percent from 2005, the last boom year. Statewide, foreclosure cases rose nearly 90 percent to about 25,000, court records show.
In a January study, the Mortgage Bankers Association found that one out of every seven Maryland homes that lenders began foreclosure proceedings on last summer was not occupied by the owner. That's nearly 900 properties. How many were occupied by tenants, no one can say, but "it's happening more and more," said Stephanie D. Cornish, program manager for the tenant-landlord counseling department at Baltimore Neighborhoods Inc.
"I don't know if it's the economy or people are buying properties and not looking at the bigger picture in terms of upkeep," she said.
With rare exceptions, renters have no legal right to continue renting after properties go to foreclosure auction, Cornish said. If the purchaser wants them to move, they have to do so, no matter how many months are left on their leases.
More than 80 tenants statewide called her group from January to April because their landlords were facing foreclosure, a 50 percent increase from the same period a year earlier. Cornish suspects there are a lot more cases she's not hearing about. Landlords occasionally call to say their tenants are sending them into foreclosure by failing to pay rent, but not nearly as often as tenants call about defaulting landlords.
To add insult to injury, some property owners continue collecting rent after the foreclosure auction, when they no longer have a right to do so, she said. That can go on for months as the new purchaser waits for court approval to take possession. To try to get that money and their security deposit back from uncooperative former landlords, renters have to turn to small claims court, Cornish said.
Janet Portman, an attorney and the managing editor at Nolo, a California-based provider of legal information and products, said it wouldn't be so bad for tenants if the new property owners let them keep renting. But in this market, the purchaser is often the lender. And lenders generally want renters out, she said.