As if losing a house on the court steps wasn't enough, some former homeowners may find themselves turned away by apartment owners spooked by the foreclosure history on their credit reports.
One Virginia couple ended up living in a hotel after their foreclosure, according to Trish Lynch, a trainer and former credit counselor at ClearPoint Financial Solutions, who worked with them.
“No one would rent to them. And the hotel is costing them $3,000 a month to stay there,” she said.
Lynch recommended they try to rent from a private owner or individual who might be more lenient on credit checks, but who could also ask for higher rents to cover their risk.
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As foreclosures rise across the country and skyrocket in economically depressed areas and once-hot housing markets, more apartment owners are seeing an increase in the number of rental applicants with derogatory mortgage histories.
That includes foreclosures, short sales – when a house is sold for less than the amount owed on the mortgage – and deed-in-lieu of foreclosure, when a homeowner gives up a house to the lender to end the foreclosure process.
Some in the apartment industry have been trying to slice and dice the applicant pool to identify who could make good renters and add to occupancy levels and the rental base, said Mark Fogelman, president of Memphis, Tenn.-based Fogelman Management Group, which owns and manages 18,000 rental units in the Southeast, Midwest and Southwest.
“For us, that's too subjective and sets a risky proposition,” he said. “We have not successfully been able to accept many applicants with defaulting mortgages primarily because they tend to have other credit issues.”
Some landlords may conditionally accept renters with foreclosures in their past. They may ask for an extra month's rent up front, a larger security deposit or a co-signer.
Donn Schaefer, president of the Metro East Landlords Association in Collinsville, Ill., is specifically seeking out displaced homeowners for his rentals. His company, Homesellers Solutions Inc., buys, sells and rents single-family homes and duplexes.
“Bad things happen to good people all the time. They need to have a place to live,” he said.