This is regular landlord/tenant law. To say that a bank or person who takes a home in foreclosure cannot "get rid of a squatter" is not true, they can go through the eviction process.
I have a feeling that this has been stipulated because there have been owners that default on their mortgage which puts the home in foreclosure. However they do not tell their current tenant in the rental and continue to collect rent for as long as possible.
This sounds like it may give the banks an incentive to “play nice” with any tenants in the foreclosed properties, and keep them in the loop on the proceedings. Not necessarily a bad thing, since renters aren’t the ones defaulting on the mortgage.
Maybe it’s unfair to the banks, but I don’t think the banks should be throwing tenants out of the property without plenty of advance notice, either.