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The recent wave of mortgage defaults is not limited to residential housing. There is a growing number of multi-fam properties (apartment houses) that are in or near foreclosure. Just like individual homeowners, these so-called investors financed these apartment buildings at low, teaser, adjustable rates a few years back. They were counting on selling at a profit before rates adjusted upward very much.
Problem is, the resale market is down. Furthermore, the foreclosures are pulling down the prices of other properties. So buyers are few; foreclosure becomes common.
In an apartment foreclosure, lenders will often void leases and evict tenants in an attempt to resell the property. But everyone in commercial real estate knows that an occupied income-producing property is worth more than a vacant building. You have to wonder what these lenders are thinking. But, it’s no wonder how such lack of sense by these same lenders contributed to the mortgage meltdown.
Some blameless tenants have been evicted multiple times as one landlord after another goes broke. Landlords for a long time have insisted on credit checks for prospective tenants. Maybe it’s time for the customers to start demanding credit checks on the landlords.