Little fixing up is good for the soul.. the bank can not assume your rental agreement until the old one has been terminated.

If they want you to assume the mortgage make sure they re-asses the property at it's true market value and get them to toss in another 20.k from that tarp fund so you can bring everything up to date.

Every one has to pay rent some place.. it might as well be toward your own mortgage. Phuck the landlord, take it if you can.