07 Oct Rhode Island Legislative Update
The Rhode Island legislature recently amended its laws governing foreclosure, effective October 6, 2014.
RHODE ISLAND HOUSE BILL 8293
The following definitions apply in the interpretations of the provisions relating to mediation conferences unless the context requires another meaning:
“Default” means the failure of the borrower to make a timely payment of an amount due under the terms of the mortgage contract, which failure has not been subsequently cured.
“Lender” means the holder of a mortgage or its agent or employee, including a mortgage servicer acting on behalf of a lender.
“Borrower” means the owner of the property subject to a mortgage who has signed a mortgage in order to secure a debt or other duty, or the heir or devisee of such person provided that:
- The heir or devisee occupies the property as his or her primary residence; and
- The heir or devisee has record title to the property or a representative of the estate of the borrower has been appointed with authority to participate in a mediation conference.
The lender must, prior to initiation of foreclosure of real estate provide to the borrower written notice, by certified and first class mail at the address of the real estate and, if different, at the address designated by the borrower by written notice to the lender as the borrower’s address for receipt of notices, that the lender may not foreclose on the mortgaged property without first participating in a mediation conference. Notice addressed and delivered as provided will be effective with respect to the borrower and any heir or devisee of the borrower.
If the lender fails to mail the above required notice to the borrower within 120 days after the date of default, it must pay a penalty at the rate of $1,000 per month for each month or part thereof, with the first month commencing on the 121st day after the date of default and a new month commencing on the same day (or if there is no such day, then on the last day) of each succeeding calendar month until the lender sends the borrower written notice as required.
Notwithstanding the foregoing, any penalties assessed for any failure of any lender to provide notice during the period from September 13, 2013 through October 6, 2014 must not exceed the total amount of $125,000 for such lender.
Penalties must be paid to the mediation coordinator prior to the completion of the mediation process. All penalties must be transferred to the state within one month of receipt by the mediation coordinator and deposited to the restricted receipt account within the general fund and used for the purposes set forth therein.
Issuance by the mediation coordinator of a certificate authorizing the lender to proceed to foreclosure or otherwise certifying the lender’s good faith effort to comply this law will constitute conclusive evidence that, to the extent that any penalty may have accrued, the penalty has been paid in full by the lender.
Notwithstanding any other provisions, a lender will not accrue any penalty if the required notice is mailed to the borrower:
- Within 60 days after the date upon which the loan is released from the protection of the automatic stay in a bankruptcy proceeding or any similar injunctive order issued by a state or federal court, or within 120 days of the date on which the borrower initially failed to comply with the terms of an Eligible Workout Agreement; and
- The lender otherwise complies with Rhode Island laws requiring notice; provided, however, that if the lender fails to mail the notice required by Rhode Island law to the borrower within the time frame set forth, the lender must pay a penalty at the rate of $1,000 per month for each month or part thereof, with the first month commencing on the 31st day after the date upon which the loan is released from the protection of the automatic stay of a bankruptcy proceeding or any similar injunctive order issued by a state or federal court and a new month commencing on the same day (or if there is no such day, then on the last day) of each succeeding calendar month until the lender sends the borrower written notice. Notwithstanding the foregoing, any penalties assessed for any failure of any lender to provide notice as provided herein during the period from September 13, 2013 through October 6, 2014 will not exceed the total amount of $125,000 for such lender.
Notwithstanding any other provisions of the foreclosure laws, a lender may initiate a judicial foreclosure as specified by Rhode Island law.
If, after 2 attempts by the mediation coordinator to contact the borrower, the borrower fails to respond to the mediation coordinator’s request to appear at a mediation conference, or the borrower fails to cooperate in any respect with the above requirements, such requirements will be deemed satisfied upon verification by the mediation coordinator that the required notice was sent and any penalties accrued and any payments owed have been paid. Upon verification, a certificate will be issued immediately by the mediation coordinator authorizing the lender to proceed with the foreclosure action, including recording the deed. Such certificate will be valid until the earlier of:
· The curing of the default condition; or
· The foreclosure of the borrower’s right of redemption.
If the mediation coordinator determines that after a good faith effort made by the lender at the mediation conference, the parties cannot come to an agreement to renegotiate the terms of the loan in an effort to avoid foreclosure; such good faith effort by the lender will be deemed to satisfy the requirements of this law. A certificate certifying the good faith effort will be promptly issued by the mediation coordinator authorizing the lender to proceed with the foreclosure action and recording of the foreclosure deed; provided, however, that the mediation coordinator will not be required to issue such a certificate until any penalties accrued and any payments owed have been paid. Such certification will be valid until the earlier of:
- The curing of the default condition; or
- The foreclosure of the borrower’s equity of redemption.
If the lender and borrower are able to reach agreement to renegotiate the terms of the loan to avoid foreclosure, the agreement will be reduced to writing and executed by the borrower and lender. If the lender and borrower reach agreement after the notice of mediation conference is sent to the borrower, but without the assistance of the mediation coordinator, the lender must provide a copy of the written agreement to the mediation coordinator. Upon receipt of a written agreement between the lender and borrower, the mediation coordinator must issue a certificate of eligible workout agreement, if the workout agreement would result in a net financial benefit to the borrower as compared to the terms of the mortgage (“Certificate of Eligible Workout Agreement”). For purposes of this law, evidence of an agreement includes, but is not limited to, evidence of agreement by both lender and borrower to the terms of a short sale or a deed in lieu of foreclosure, regardless of whether said short sale or deed in lieu of foreclosure is subsequently completed.
Notwithstanding any other provisions of the law, where a borrower and lender have entered into a written agreement and the mediation coordinator has issued a certificate of eligible workout agreement, if the borrower fails to fulfill his or her obligations under the eligible workout agreement, the provisions of this law will not apply to any foreclosure initiated within 12 months following the date of the eligible workout agreement. In such case, the lender must include in the foreclosure deed an affidavit establishing its right to proceed.
This law applies only to foreclosure of mortgages on owner-occupied, residential real property with no more than 4 dwelling units which is the primary dwelling of the borrower and not to mortgages secured by other real property.
The provisions of this law will not apply if the mortgage is a reverse mortgage as specified by Rhode Island law.
Any person who claims that a foreclosure is not valid due to the lender’s failure to comply with the above terms will have one year from the date that the first notice of foreclosure was published to file a complaint in the superior court for the county in which the property is located and must also file in the records of land evidence in the city or town where the land subject to the mortgage is located a notice of lis pendens, the complaint to be filed on the same day as the notice of lis pendens, or within 7 days thereafter. Failure to file a complaint, record the notice of lis pendens and serve the lender within the one year period will preclude said borrower or any other person claiming an interest through a borrower from subsequently challenging the validity of the foreclosure. Issuance by the mediation coordinator of a certificate authorizing the lender to proceed to foreclosure or otherwise certifying the lender’s good faith effort to comply with the above provisions will constitute a rebuttable presumption that the notice requirements have been met in all respects.
The above provisions expire on July 1, 2018.
The provisions relating to foreclosure counseling have been repealed.