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.
"Somebody convinced those bankers of a completely counterintuitive proposition, namely the property you now own is going to be more valuable when it's vacant," she said. "Why they buy that, I cannot figure out. I've talked to banker types, and the only answer I get is ... 'You know, we're bankers, we're not landlords.'"
Selina James-Deming, vice president of property management and leasing with the Long & Foster Cos., which manages rental homes, is seeing a small but growing number of local tenants being displaced by foreclosure.
"They're kind of between a rock and a hard place," she said. Until the auction, "their contract isn't void. It creates huge uncertainty."
Long & Foster makes its client property owners sign an agreement that they're up to date on their mortgages and other obligations, but not everyone is honest. In one case, tenants moved in, only to find that the landlord had stopped paying while the home was being marketed, James-Deming said.
Something similar appears to have happened with the Frederick Avenue home near the Baltimore city-county line that Phavone was renting. She said she moved in last August. At the end of that month, the lender took the property back at foreclosure auction, according to Alex Cooper Auctioneers' records.
David McIlvaine Jr., a real estate agent hired to handle the property, showed up the day of the eviction thinking the rowhouse was probably vacant and the eviction would be merely a formality. Grass on the front lawn had sprouted two feet high.
But a boy looked out an upstairs window soon after Saunders, the sheriff's deputy, banged on the door. Phavone's cousin and his wife, who were visiting, answered the knock with bewildered looks.
Phavone rushed back from the errand she had gone out to run, thinking there was a misunderstanding she could clear up. "I pay him every month," she said, referring to one of the two people who had borrowed to buy the house.
"They don't own it anymore," McIlvaine explained. "The bank owns it. They haven't been paying the mortgage for eight or nine months."
Slowly, the story revealed itself. When Phavone received the sheriff's notice of impending eviction a month earlier, she'd thought it was an attempt to track someone down about an unpaid bill. She didn't recognize the name on the document, she said, because it didn't belong to the man to whom she sent the checks - instead, it was his co-signer on the mortgage. Phavone was aghast to hear she was supposed to pack up and leave immediately. (She eventually moved in with someone she knew nearby, McIlvaine said later.)
McIlvaine, who didn't want to toss Phavone out with nowhere to go, agreed to give her a week. He told her to call if she needed help finding another place to rent. He offered to share the name of an attorney to try to get back her $1,200 security deposit. And no, he said, she would not have to send a final month's rent to the former owners.
Phavone, 30, retreated to her living room, her life thrown into disarray.
"I don't want to move out," she said.