California Eviction and Foreclosure Bans

This is just my interpretation, and I could be wrong so one should again do their own investigation and talk with your own legal and financial professionals.

California Gov. Gavin Newsom issued an executive order making it clear that local city governments can impose eviction protections for tenants who are unable to pay their rent because of the coronavirus or loss of income as a result of the outbreak.

Almost immediately, San Francisco, San Diego, and many other California cities, announced such bans. Currently it looks like these bans are effective until May 31, 2020, unless extended.

What I find disturbing about this compassionate order is the fact that I have not seen any definitive outline of how the rental owners are going to be compensated for what could easily be thousands in unpaid rent!

California Eviction and Foreclosure Bans

Gov. Gavin Newsom’s executive order definitively states that California cities can put the bans in effect immediately, but only asks mortgage lenders to look for solutions granting some relief.

Personally, I believe that before or in unison with our California governor and cities issuing these bans they should have clearly defined how the rental owners would be compensated for their loss of rental income.

Many single-family home rentals are owned by resident who may just own one rental and in many cases this rental was the owner’s first home. Instead of selling the home, they decided to keep it as an investment. The vast majority of these Mom & Pop rental owners have existing mortgages on their rental units. Plus, they are obligated to make repairs and do preventive maintenance. Most of these rental owners have allowed for these costs but to now be banned form evicting non-paying renters, could very well end up with a future foreclosure by their mortgage lender.

Now, I understand the lenders will most likely work with the owners to allow for late or non-mortgage payments, but, I do not believe they will or can just forgive two or more monthly payments.

Keep in mind most mortgages are packaged up into large bundles of mortgages and sold to other financial institutions.

So, in the real world, the State or cities should NOT but the burden of providing housing to non-paying renters under any circumstances. What should be done right now is clearly state that these California rental owners who are affected by non-payment of rent will immediately be compensated in full and in an expeditious manner by the cities that issue these bans.

Sure, I know this is California, but to rush off with evictions without details on how the owners will recoup their losses seems crazy.

The order does not relieve a tenant from the obligation to pay rent or restrict the landlord’s ability to recover rent that is due.  The problem with this is if the tenant just moves out after two or more months of non-payment of rent, and has no funds or no job to return to, how does the landlord recover the rental losses?

If the tenant skips town, or have no or few resources, chances are nil that the landlord will ever recover these loses. Sure, at high additional cost, a landlord might hire an attorney to try to recover lost rent. But first you must track down the tenant’s new location, and if out of State, your legal expenses will soar, and your chance of recovery severely diminish.

The California Governor and California cities should have, and still can, say the tenants in trouble with rent payments can apply for vouchers that can be given the landlords in place of rent. Then the landlords can cash these vouchers for cash at designated banks. The Governor just about two months ago stated that California has 26 billion in surplus. This surplus and the emergency measure passed by the state Legislature Monday which frees $1.1 billion for Newsom’s COVID measures should be used to compensate the California landlords for rental losses.

This is just my interpretation, and I could be wrong so one should again do their own investigation and talk with your own legal and finincial professionals.

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