As witnessed over the last several years, foreclosures lead to vacant homes, which destabilize neighborhoods and further drive down property values as well as having a devastating impact on the families that lose their home. In response, Attorney General Peter F. Kilmartin filed legislation to the Rhode Island General Assembly requiring mortgage service providers to participate in good faith in a conciliation process administered by a HUD-approved independent agency. The goal of the process is to facilitate an agreement between the lender and homeowner that will avoid a foreclosure. The legislation, H5335S0416, is sponsored by Representative Raymond Gallison and Senator Donna Nesselbush.
The legislation serves to protect homeowners by requiring loan servicers to engage a Conciliation Conference Coordinator at a HUD-approved independent counseling agency prior to finalizing the foreclosure process. By requiring participation in a conciliation process, the legislation gives the homeowner an opportunity to directly engage a representative of the lender, which often results in an agreement that avoids foreclosure. Lenders, homeowners and neighborhoods all benefit when foreclosure can be prevented.
"The goal of this legislation is to provide a consistent, effective conciliation effort to offer homeowners an opportunity to work directly with their lender on a work-out solution while learning about programs that may assist them in keeping their homes," said Attorney General Kilmartin. "It is beneficial for the homeowner, the mortgage service provider, and the community at large to find a way to keep people in their homes."
The legislation is similar to ordinances adopted by Providence, Cranston, Warwick, and Warren in response to the increasing number of foreclosed properties in those municipalities. The legislation incorporates lessons learned from the success of programs established by the four municipalities by making conciliation available to the homeowner earlier in the foreclosure process before the homeowner becomes too far delinquent. This will increase the chances of a successful resolution.
In addition, by establishing a uniform process applicable throughout the state, this bill will benefit lenders, who now are required to follow different rules in communities that have or may adopt similar foreclosure prevention ordinances. The legislation exempts "local lenders" that service their mortgages and offer homeowners a forbearance relief program that is consistent with the forbearance relief requirements applicable to FHA-Insured Mortgages. The conciliation conference is offered at no cost to the homeowner or the state. Housing counseling combined with a conciliation conference is one of the most effective ways to help homeowners avoid foreclosure. As of the end of 2012, of the homeowners who have completed the conciliation conference process, eighty-five percent were able to reach agreement with their lenders to avoid foreclosure and remain in their homes.
"This legislation will create a state-wide process that will help homeowners and lenders work out agreements to allow homeowners facing difficult economic times to remain in their homes," said Representative Raymond Gallison (District 69, Bristol, Portsmouth). "It also benefits lenders, who will now be able to have one set of rules state-wide, and who will be able to keep properties occupied, thereby reducing their liabilities by avoiding having to deal with vacant properties."
"I am proud to sponsor this legislation which provides crucial tools to homeowners facing foreclosure," said Senator Donna M. Nesselbush (D-Dist. 15, Pawtucket, North Providence). "This bill will help more Rhode Island families stay in their homes. It ensures homeowners are provided with information regarding any programs that could help them, as well as greater access to mortgage modifications. It also requires that lenders act in a timely manner and adhere to uniform standards when executing foreclosures. I commend Attorney General Kilmartin for his commitment to this issue, and am confident this measure will go a long way in keeping Rhode Island families from homelessness."
"As I said many times when the national mortgage foreclosure settlement was announced, the breadth and complexity of issues posed by the national mortgage crisis are staggering, and it will take a great deal of effort – and commitment – on behalf of our elected leaders, our community partners, the mortgage service providers, and homeowners, to right the housing crisis," continued Kilmartin. "This mortgage foreclosure conciliation legislation is one more piece to the puzzle."