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Extending Foreclosure Protections for Homeowners

The Rhode Island legislature has voted to extend the sunset provision on the state’s Residential Mortgage Foreclosure Act, which mandates “good-faith effort” mediation between lenders and homeowners facing foreclosure before that foreclosure can go forward.

The Act, which was originally passed in 2013, was due to expire on July 1 due to its original sunset clause. It requires the lender and homeowner “to deal honestly and fairly with the mediation coordinator with an intent to determine whether an alternative to foreclosure is economically feasible.” The mediator must a member of a HUD-approved counseling agency and is required to serve as an “unbiased, impartial and independent coordinator” between the lender and homeowner.

Rhode Island Senate Bill 2270 shifts the sunset clause of the Act back to July 1, 2023, extending it by another five years. A companion bill, House Bill 7385, would have removed the sunset clause entirely, but it stalled along the way. Senate Bill 2270 is now headed for the desk of Rhode Island Gov. Gina Raimondo.

Why was there a sunset clause on the original bill in the first place? According to The Jamestown Press, optimism. The Jamestown Press reports that “The sunset clause was added because legislators hoped the economy would bounce back stronger by now. The Jamestown resolution, however, says ‘while foreclosure rates have improved since the depths of economic crisis, the percentage of Rhode Islanders facing foreclosure today is still four times higher than pre-crisis rates.’”

The AP reports that nearly 1,000 homeowners have sought mediation since 2013. Furthermore, Rhode Island Housing—the organization that administers the state program—more than 70 percent of the homeowners who have participated in the mediation program have come to terms with the lenders and were able to remain in their homes.

According to The Jamestown Press, “Before the law took effect, Rhode Island had one of the least restrictive foreclosure procedures in the country. Lenders merely were required to provide notice to the homeowner of their intent to initiate foreclosure. They also had to post public notice of the foreclosure in a newspaper. There was no required court involvement and no requirement that lenders meet with borrowers to explore alternatives to foreclosure.”

The housing crisis a decade ago saw nearly 10,000 Rhode Island homes go into foreclosure. Had the Residential Mortgage Foreclosure Act been allowed to expire, Rhode Island would have once again joined the handful of states that do not require a judicial or mediation process prior to foreclosure. In written testimony to the state’s Senate Judiciary Committee, Rhode Island attorney Michael Zabin put it succinctly, saying that if the mediation requirement had been allowed to lapse, “we would be back to the wild, wild West that existed before the statue.”

About Author: David Wharton

David Wharton, Editor-in-Chief at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has nearly 20 years' experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. He can be reached at [email protected].

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