Living in a foreclosed apartment

A New York apartment building

TEXT OF STORY

Kai Ryssdal: Given the state of the American housing industry, there's a lot to be said for not owning a home, for just being a tenant. You pay your rent. Your landlord's responsible for maintenance. Everything's fine. Except, foreclosure can happen to tenants, too.

Marketplace's Alisa Roth reports.


Alisa Roth: There's no switch for the light in Etta Hill Banks' bathroom. If you want to turn it off, you have to unscrew the fuse. Now, the fuse box is 10 or 12 feet up, almost where the wall hits the ceiling.

Roth: How do you climb up there?

Etta Hill Banks: Well, I have a ladder. Get on the ladder, then I get up here and do that.

That is, she climbs onto a table that's pushed up against the wall. It's a pretty impressive feat, especially when you consider she's 74, and she walks with a cane. She'd really like to get the light fixed. But it's not that simple.

Jonathan Levy: There's a responsibility vacuum.

Jonathan Levy is a lawyer for Legal Services NYC - Bronx. He's helping Hill Banks and her fellow tenants with a legal action. They want a judge to make somebody come up with the cash to repair the building.

Levy: The party that was initially responsible has essentially disappeared -- that's the landlord.

The landlord is technically a real estate investment company in Los Angeles, a place called Milbank. It got a mortgage from Deutsche Bank. But Deutsche Bank packaged the mortgage into a mortgage-backed security trust, which it sold to Wells Fargo.

Now, if that weren't complicated enough, the real estate company, Milbank, defaulted on the loan. And the property's in foreclosure.

If you're totally confused about who's responsible, just imagine trying to figure out who to call about that light switch in your bathroom. In fact, Etta Hill Banks does have someone to call -- it's the receiver. That's the person the court appointed to collect rent and keep the building up while it's in foreclosure. The problem is, the receiver says there's no money.

Hill Banks: He did tell us that he doesn't have money to make major repairs and paint, and the only thing he could do now was to give us heat and hot water and try to keep the elevator repaired and keep the building clean.

Jonathan Levy, the lawyer, says he doesn't care who's responsible.

Levy: We think somebody's got to come up with this money. It can't be the tenants the ones who pay for this foolish gamble.

Ms. Hill Banks' building is one of 10 the developer bought in the Bronx. Housing advocates guess it could cost several million dollars to fix the thousands of violations in the whole portfolio.

Adam Levitin is a law professor at Georgetown University. He says the situation's not that different from a regular foreclosure.

Adam Levitin: While it's in foreclosure, the ownership of the building is basically not stable. There's no one who wants to take charge of the building while the foreclosure process is still pending.

All of the parties involved -- the landlord, the bank, the trustee, the special servicer, the receiver -- say it's not their problem. That's what the judge has to decide.

The hearing is scheduled for the middle of June, and Levy says it'll probably be several months before there's a ruling. And who knows how long it'll take before Etta Hill Banks can switch off her bathroom light like the rest of us.

In New York, I'm Alisa Roth for Marketplace.

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