Jamestown’s state senator has introduced legislation to protect financially strapped homeowners by preserving the Foreclosure Mediation Act.
Sen. Dawn Euer, a Democrat who was re-elected in November to serve District 13, wants to remove the sunset provision from the law so lenders remain legally required to offer mediation prior to foreclosure. The law is scheduled to expire in July.
“To a lender, a mortgage might just be a line on a spreadsheet,” she said. “But to a homeowner, it’s so much more than that. These additional protections help people get back on their feet, stay in their homes and keep paying their bills. That’s better for everyone.”
Before the law was passed in 2013, the foreclosure process in Rhode Island was one of the least restrictive in the nation. Lenders could proceed to foreclosure, without any court involvement, simply by providing notices to homeowners.
When the housing bubble began to burst in late 2006, cities like Providence, Cranston and Warwick wanted to protect their taxpayers, so they began to pass ordinances requiring mediation between lenders and homeowners before the banks could proceed to foreclosure.
Using these city codes as a blueprint, the state legislature in 2013 decided it would “develop a standardized, statewide process for foreclosure mediation rather than a process based on local ordinances that may vary from municipality to municipality.”
The law mandates a “good-faith effort” between a homeowner and lender “to deal honestly and fairly with the mediation coordinator with an intent to determine whether an alternative to foreclosure is economically feasible.”
The mediator, who must be from a counseling agency approved by the U.S. Department of Housing and Urban Development, serves as an “unbiased, impartial and independent coordinator.”
Although the statute originally was slated to expire in 2018, lawmakers passed a five-year extension. The Jamestown Town Council at the time was among the local governing bodies to call for an extension by passing resolutions.
According to the resolution, the council “places itself on record as supporting legislation to eliminate the expiration of the foreclosure mediation act.”
The sunset clause was added because legislators hoped the economy would bounce back stronger. The resolution, however, said “while foreclosure rates have improved since the depths of the economic crisis, the percentage of Rhode Islanders facing foreclosure today is still four times higher than pre-crisis rates.”
Federal housing protections put in place during the coronavirus pandemic, moreover, are expiring, which makes extending state-level protections even more urgent, Euer said.
Advocates say the law is working. According to Rhode Island Housing, more than 1,500 homeowners have participated in mediation conferences since the law was passed. About 46 percent of completed mediations have resulted in the homeowner avoiding foreclosure through loan modifications, reinstatements and repayment plans.