A woman named Missionary-Tracey Elaine Blair was living there.
Blair refuses to leave the home, and Peterson doesn't have the means go elsewhere.
In a bizarre twist involving legal issues, both women are living in the same house: owner and alleged squatter.
"She thinks that this is a program in Detroit to take people's homes and fix them up, and then she gets to keep them," Peterson told MyFoxDetroit.
Peterson said Blair changed the locks, replaced the appliances and reworked the plumbing in the older home. Peterson purchased the home in the historic Boston-Edison neighborhood of Detroit for $23,000, she said. She left last year when it was in need of repairs.
Blair, a former tenant at Peterson's house, said she was evicted in February 2011. "We had to vacate because the boiler was damaged," Blair said. "I took all my books and my writings, but my (furniture was) still left in (there)."
Blair says she is not squatting and has a lease.
While a squatter has no legal right to the property, the homeowner cannot remove a squatter by force, MyFoxDetroit reports. In this case, as in many others, Peterson must prove she is the rightful owner of the property in civil court and then seek eviction.
In the meantime, Blair and Peterson are living under the same roof.
The video clip from MyFoxDetroit showed Blair had placed personal photographs along the fireplace mantel and changed the curtains in the house.
Peterson expressed concern about safety for her and her 1-year-old daughter.
"I don't know what her capabilities are," Peterson said. "We're afraid of her mindset of entitlement."
Blair, who is a write-in candidate for president, said, "I'm an advocate for affordable housing. That's a part of my campaign," she said."I signed an oath pledging that I would fight for affordable homes."
Squatting has been an issue in Detroit. One family recently bought a dream home on the city's west side only to find it stripped of copper, appliances and plumbing—allegedly by squatters.
Similar stories can be found around the country, including in Littleton, Colo., where squatters staked their claim on a vacant house.
In Detroit, Peterson will continue to press her case in court, but in the meantime the unusual living arrangement continues.