The Mortgage Conciliation Act signed into law by Gov. Lincoln D. Chafee this month requires banks and lenders to make a good-faith attempt to negotiate with homeowners before foreclosing on homes.
“Nobody wants to foreclose, believe me,” said Rhode Island Mortgage Bankers Association President Deborah Imondi. “We always realize there may be situations like medical issues or loss of a job that may cause delinquency.
“Hopefully, this law will give a reprieve period that will give some time for new job creation and that’s what’s going to lead to financial and economic stability for our residents,” Imondi said.
The law requires mortgage lenders to provide the homeowner written notice that a foreclosure may not proceed without a mediation conference with a HUD-approved independent counselor. The notice must be in English, Portuguese and Spanish.
The notice of required mediation is for mortgages not more than 120 days delinquent. The mediation conference must take place within 60 days of the mailing of the notice.
“It allows a consumer facing foreclosure to sit down with a representative of the bank and a third party to mediate whether there is a fair alternative,” said Joey Lindbeck, special assistant to Rhode Island Attorney General Peter Kilmartin.
“Communities that have mediation ordinances, like Warwick and Warren, that go through Rhode Island Housing, that has been going well,” said Lindbeck. “While we are still hearing complaints from consumers about getting the runaround from providers … that has decreased.”
Under the new law, if the homeowner does not respond or cooperate with the effort at conciliation conference with the lender, the lender may proceed with the foreclosure process.
The new legislation applies to “owner-occupied, residential real property, with no more than four dwelling units, which is the primary dwelling of the owner.”
While Rhode Island’s mortgage crisis has eased somewhat, as is the situation in many areas of the U.S. in the few years since the peak of the financial crisis and complications that arose from lowered underwriting standards for mortgages, the problem is not over for many families in the Ocean State.
Residential foreclosures filed in Rhode Island fell 26.5 percent in the first quarter of 2013 compared to the first quarter of 2012, according to a June report by HousingWorksRI.