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NEW: House Passes Negotiation Before Foreclosure Bill

Tuesday, April 16, 2013


The House of Representatives passed legislation last week, sponsored by Rep. Raymond E. Gallison Jr. to require banks and lenders to make a good-faith attempt to negotiate with homeowners before foreclosing on homes in Rhode Island.

“It’s in everyone’s best interest to prevent foreclosure,” said Representative Gallison (D-Dist. 69, Bristol, Portsmouth). “Lenders are better off if they can continue receiving steady payments, even if they are a little lower, from the homeowner. Communities and our state obviously are hurt when houses are left empty and unattended. And of course, foreclosure is a huge loss for a family, who is then at risk for homelessness and has lost whatever investment they’ve made in their home. We need to ensure that lenders are doing their best to avoid foreclosing.”

According to the latest quarterly foreclosure data provided by HousingWorksRI, for fourth quarter 2012, Rhode Island saw an 11.2 percent drop in the number of residential foreclosure deeds filed in Rhode Island compared to fourth quarter 2011, and a 36 percent decline from the same time in 2009.
The 2012 numbers showed less than one perent of the state’s mortgaged housing stock foreclosed, down from 1.13 percent in 2011, with 1,617 residential foreclosure deeds filed.

“Four in 10 households with a mortgage are considered cost burdened, spending more than 30 percent of their income on housing costs,” according to Jessica Cigna, the research and policy associate at HousingWorks RI. “Looking closer at U.S. Census data we see that 18 percent of those same households have someone unemployed.”

Under the legislation (2013-H 5335 Sub. Aaa), lenders would be required to attempt to engage a mortgager at risk of foreclosure in a conciliation conference to try to come to an agreement to modify the terms of the mortgage. If the effort is successful and an agreement is reached, the lender would not have to fulfill the requirement again if the mortgager fails to comply within the next nine months. The legislation, which would take effect 60 days after enactment, would apply only to owner-occupied residential properties of one to four housing units.

If the mortgager does not respond or cooperate with the effort to hold a conciliation conference with the lender, the lender may proceed with the foreclosure process.

Rhode Island’s unemployment rate of 9.4 percent is well above the national average, and many Rhode Islanders are struggling to avoid foreclosure. According to the Mortgage Bankers Association, Rhode Island ranked first in New England and seventh in the nation for new foreclosures in the fourth quarter of 2012, although the number of foreclosures in the state did decline by 23 percent from the previous year.

The bill is cosponsored by Rep. Kenneth A. Marshall (D-Dist. 68, Bristol, Warren), Rep. William W. O’Brien (D-Dist. 54, North Providence), Rep. John G. Edwards (D-Dist. 70, Tiverton, Portsmouth) and Rep. Agostinho F. Silva (D-Dist. 56, Central Falls), and will now be forwarded to the Senate, where Sen. Donna M. Nesselbush is sponsoring similar legislation (2013-S 416).


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