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Renters forced out as more Arizona landlords default on mortgages

PHOENIX – The electricity has been cut off and nobody’s home at a handful of houses in one Apache Junction neighborhood known as Jacob’s Ranch. The same is set to happen to at least 12 more homes in the area by the end of November.

But there’s more to the emptying neighborhood than the familiar tale of homeowners who took on more mortgage than they could manage. The families living there were renters who found themselves with less than two months to find another place to live.

Their landlords have been collecting rent but not paying off mortgages, and now their tenants have been dragged into sharing the consequences.

The scene echoes across the Phoenix metro area, other parts of Arizona and the country as the number of foreclosures continues to climb. And renters who face eviction via foreclosure are finding that the law isn’t on their side.

“Tenants have no rights in this arena,” said Ken Volk, founder of the Arizona Tenants Advocates & Association. “The laws are outdated.”

Under the current Arizona Residential Landlord and Tenant Act, homeowners going into foreclosure aren’t bound by law to tell renters about the situation. And because the process of turning a property over to a bank or title company can take months, some landlords wait until the last minute to inform their tenants, allowing them to continue to collect rent money.

“You’re talking fraud and greed,” Volk said. “Sometimes these owners are scam artists, pocketing all the rent money and deposits.”

Volk said his organization has been getting about 20 to 30 calls or e-mails a week from renters whose landlords haven’t paid mortgages.

The recent housing boom in Maricopa and Pinal counties created an “overheated, overhyped, overspeculated” market, with many buyers being out-of-state investors, said Pete TeKampe, who is on the board of directors of the Arizona Multihousing Association, the trade association for the state’s apartment and rental housing industry.

Amateur investors thought they would get rich quick by snapping up a cluster of properties to flip down the road, but that changed when the housing bubble burst. Now the rental rates that landlords are able to generate in the current market don’t mesh with the inflated values for which houses were originally purchased.

TeKampe said that disconnect is partly what has driven the continued wave of rental foreclosures.

“All boats ride with the tide,” TeKampe said, “and when the tide goes down, you see who’s swimming naked.”

A bill aimed at reforming the state’s landlord/tenant act flopped in the Arizona Legislature last session without muscle from a lobbyist, Volk said, but he and others will try again in the coming session.

If any legislation passes, it will be too late for the families in Jacob’s Ranch who were forced to leave.

Mandy Dieffenbach and her fiancé, Clinton Griffin, moved into Jacob’s Ranch in 2007. They were so happy in the newly built home that they signed on to renew the yearlong lease in May. Then, less than two months later, they found a foreclosure notice in the mail.

After a talk with the property manager, they learned their deposit was gone and it was time to go.

“We have to get up and move and start all over again,” Dieffenbach said.

Griffin, Dieffenbach and Dieffenbach’s mother, Elke, hope to be settled into a new home in the Santan area by the end of the month.

“Unless you really have the money to fight these people, there’s not much you can do,” Elke Dieffenbach said. “Let’s face it – not many renters have the savings to go after people like this.

“It’s disconcerting, it’s discouraging, it’s depressing.”

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