SHAC-supported foreclosure bills meet resistance

During the 2008 legislative session, two bills supported by the Statewide Housing Action Coalition relating to residential foreclosures were introduced in the General Assembly. Only one passed, but that bill, requiring property upkeep to “minimum standards” on foreclosed properties, was vetoed by Gov. Donald L. Carcieri.
“It was the only piece of foreclosure legislation that the General Assembly had passed this year,” said Brenda J. Clement, SHAC executive director, “and it’s obviously a huge problem and something that is being unaddressed here.”
The bill that passed – House Bill No. 7327 Sub A – would require “people or banks that buy a property at foreclosure to post a bond,” Clement said, “because one of the main problems that go along with the increasing number of foreclosures is also the number of vacant and abandoned buildings.”
In vetoing the bill on July 1, Carcieri cited its potential impact on the housing market. “This bill will make it more costly for Rhode Islanders to obtain real estate loans because when issuing new loans, lenders will have to consider the additional bonding costs that will be imposed should a property be subject to foreclosure,” he wrote. “Fewer Rhode Island borrowers will then qualify for home loans, thus reducing the demand for housing in the state and further lowering home values.”
In introducing that legislation, Rep. Charlene M. Lima (D-Cranston) said that it would end the “foreclosure blight that plagues local neighborhoods.”
Last week, Lima said Carcieri had “caved in to special interests.”
There had been some concern from mortgage bankers, and others, who said the bill would “prevent people from buying up properties at foreclosure,” Clement said.
Lima said the average cost of the bond would have been about $100 per $100,000 property value.
“You’re talking about charging the banks, which caused the problems, a fee of $50 to about $300,” she said. “The consequences of not having this legislation are astronomical. It’s destroying peoples’ property values and neighborhoods and it’s bringing in crime.”
Another legislative proposal supported by SHAC would have required stricter tenant notification timetables for foreclosed properties.
In introducing Senate Bill No. 2110, Sen. Juan M. Pichardo (D-Providence) said that now, when a property enters foreclosure, the tenant is “not given any notice and often evicted.”
“In many foreclosure situations, a tenant is unaware of what’s happening and comes home from work on day to find a property auction taking place on his or her lawn,” he said.
The bill, introduced during January, was ultimately held for further study in April. In the House, Majority Leader Gordon D. Fox (D-Providence) introduced companion legislation – House Bill No. 7892 – that was tabled on June 19.
“We worked all session trying to negotiate some language – with the mortgage bankers and others – but we ultimately couldn’t come to a consensus,” Clement said.
And there’s ample evidence suggesting the foreclosure problem in Rhode Island isn’t likely to go away soon, Clement said.
According to the Center on Budget and Policy Priorities (www.cbpp.org), a nonpartisan research and policy group based in Washington, D.C., Rhode Island faces the second highest level of “economic distress” in the nation.
The agency last month released a study that lists the states based on three categories: change in employment, food stamp caseload and foreclosures. Rhode Island didn’t fare well in any category – it was named first, seventh and fifth, respectively. (Overall, Massachusetts ranked 11th and Connecticut earned the 17th spot.)
In calling for an independent check on Carcieri’s budgeting practices and the “direction” of the state, the R.I. Coalition for the Homeless touted the study – on July 1, the day the 2009 fiscal year began –as a sign that the state needs to better address housing and social service issues.
“The study looked at three seemingly nonlinked pieces of data that actually did give some indication to how stressed low-income families are,” said RICH Executive Director Jim Ryczek. “And when that’s all compiled together, it gives us a ranking just below Florida … in the distressed states.”
Ryczek said the state this year dealt with projected budget shortfalls by “disproportionately” cutting social programs, like RIte Care and the Neighborhood Opportunities Program.
“When the governor put out the budget back in January, he was clear to say that the pain of this balanced budget would be shared by all Rhode Islanders,” Ryczek said. “But by our reckoning … we think the budget is disproportionately affecting very low and low-income Rhode Islanders.” •