Thelma Hill and her five children lived in a Duplex on Geranium Street in St. Paul. She was up to date on her rent and so was her neighbor in the other apartment. With no warning they got a water shut off notice. Then a sheriff's deputy showed up to serve foreclosure papers.
And then they found out the other utilities also had not been paid in months.
"It's kind of like a shocker because when you're paying rent and all your utilities are included, you're expecting the landlord to do what he's supposed to do," Hill says.
Despite repeated attempts to reach the landlord, Hill was unsuccessful. The landlord did not return calls from MPR either.
Hill decided she couldn't keep her kids in an apartment without running water. She had no other place to stay so she made her way to a homeless shelter more than 14 miles across town.
Hill says she and her kids now have a long commute by bus back to St. Paul for school and her job at a Burger King.
"It took me like five to 10 minutes to get there before. It takes me about an hour and 15 to get there now. It took my kids five minutes to get to school and it takes them 30 minutes to an hour to get to school. They have to be downstairs at 6:50 a.m. to catch the bus," Hill says.
Hill is typical of a hidden but growing problem. In Ramsey County last year, investor properties accounted for 43 percent of foreclosed mortgages. In Hennepin County officials estimate the number at about 47 percent for the first three months of this year. No figures are available for the state as a whole.
It is not clear how many of those properties had tenants. But experts predict the pace of total foreclosures will continue to increase, meaning more tenants could also be at risk of losing their homes in the future.
Abe Appert represents the landlord group Minnesota Multi Housing Association. Appert says he is not surprised that investors make up such a large proportion of foreclosures.
"A lot of it is attributable to pure investors who really just wanted to buy into the real estate investment game just like you would buy into the stock market or any other investment," he says.
Do research on your landlord so you will not end up in the same situation that I'm in.Thelma Hill
Appert says many investors bought real estate hoping to make a quick profit during the real estate boom.
According to Appert, "they were trying to capitalize on what was a market opportunity and like all markets they cycle and the opportunity went away and so they got caught. Somebody always gets caught."
But with rental properties tenants are also getting caught.
When a rental property goes into foreclosure tenants still have six months before they have to move out. The law requires landlords to give tenants notice of eviction in advance but housing advocates say this often does not happen.
Minneapolis legal aid attorney Carol Johnson sees an increasing number of renters whose landlords are in foreclosure. She says many renters moved into a place unaware it was already in foreclosure at the time they signed their lease.
"I would say at least half the people have looked at me completely astonished and said, 'I didn't know this had happened. I wouldn't have rented from this person.' It's that last category of people who rented and had no idea any of this was going on, those are the real tough situations to try and explain to people. It really makes you mad," Johnson says.
Experts say many landlords are having problems with the kinds of subprime loans that have also forced homeowners into foreclosure. These are high-interest home loans with hidden fees and adjustable interest rates.
But some landlords defend using subprime loans to invest in rental properties.
Contractor and landlord Brian Kallioinen says the low teaser rate on these loans allow him to develop affordable housing in collaboration with a non-profit. He says his business requires him to carry a lot of debt, and that jacks up the interest rate he would pay on a standard loan.
"When you end up with an 8.25, 8.5 even a 9 percent interest rate, affordability is just out of reach," he says.
Kallioinen has dozens of tenants in Minneapolis and he has never been foreclosed on.
As a tenant caught up in foreclosure, Thelma Hill has this advice:
"Do research on your landlord so you will not end up in the same situation that I'm in."
After spending two months in a homeless shelter Hill says she hopes to be in a new place back in Saint Paul in June. But Housing advocates say they worry that the foreclosure boom will leave tenants with fewer affordable options in the future.