2013 -- H 5512 SUBSTITUTE A

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LC01159/SUB A

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO PROPERTY - FORMS AND EFFECT OF CONVEYANCES

     Introduced By: Representatives Kennedy, San Bento, Melo, Valencia, and Naughton

     Date Introduced: February 14, 2013

     Referred To: House Corporations

(Attorney General)

It is enacted by the General Assembly as follows:

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     SECTION 1. Chapter 34-11 of the General Laws entitled "Form and Effect of

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Conveyances" is hereby amended by adding thereto the following section:

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     34-11-43. Legislative findings. -- The public recording of all transfers of mortgages on

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residential property is a matter of state concern. Since 1997, a majority of participants in the

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mortgage banking industry have been using a private registry for tracking and transferring

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mortgages. This practice has privatized the land recording process and undermines the accuracy

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of public land records. As a result, borrowers often do not know which entity owns their loans,

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and courts are faced with questions regarding which entity has standing to bring a foreclosure

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action. This uncertainty unnecessarily burdened the state’s judicial resources as record numbers

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of foreclosure actions were filed during the recent financial crisis. This act requires that all

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transfers of the debt secured by a mortgage on residential property be accompanied by a recorded

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assignment of the mortgage lien, and provides that the failure to record such assignments within a

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certain time will render the mortgage lien void.

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     34-11-44. Declaration of policy. -- It is declared that it is the policy of this state to

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provide an accurate public record of all ownership interests in mortgages on residential property.

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     34-11-45. Assignment of mortgages and mortgage assignments previously recorded

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in name of nominee. -- (a) Any mortgage or mortgage assignment that therein identifies as the

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mortgagee an entity that is not the payee, holder or beneficial owner of the note secured by the

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mortgage at the time of the recording, or that identifies an entity as the mortgagee in a nominee or

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agency capacity for the original lender, owner or holder of the note, shall not be valid or

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enforceable if recorded after the enactment of this section. The invalidity of the mortgage shall

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not invalidate the underlying indebtedness intended to be secured by the mortgage.

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     (b) Notwithstanding the provisions in subsection (a) of this section, any mortgage or

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mortgage assignment recorded prior to the enactment of this section which identified as the

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mortgagee an entity acting as the nominee or agent of the note holder or originating lender of a

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mortgage loan shall be deemed void, except that such mortgage shall be deemed valid and

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enforceable upon the following conditions:

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     (1) The mortgage interest is assigned from the entity identified as a nominee or agent to

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the current holder of the note secured by the mortgage within ninety (90) days of the enactment of

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this section;

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     (2) If any transfers of the note secured by the mortgage took place since the original

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recording of the mortgage were not accompanied by a recorded assignment of the mortgage

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interest, then all such transfers shall be documented with a corresponding instrument assigning

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the mortgage from the transferor of the note to the transferee of the note, and indicating the date

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of the transfer; and

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     (3) All assignments described as required herein shall be recorded pursuant to section 34-

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11-24 of the general laws, with all applicable recording fees for each assignment paid in full.

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     SECTION 2. Sections 34-11-1.3, 34-11-22 and 34-11-24 of the General Laws in Chapter

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34-11 entitled "Form and Effect of Conveyances" are hereby amended to read as follows:

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     34-11-1.3. Name and address of mortgagor and mortgagee -- Recording. -- (a) Every

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mortgage deed presented for record shall contain or have endorsed upon it the name and address

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of the mortgagor and mortgagee and the address shall be recorded as part of the mortgage deed.

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Failure to comply with this section shall not affect the validity of any mortgage deed, but the city

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or town clerk may charge an additional two dollars ($2.00) for a recording fee if the name and

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address does not appear on the instrument. The purpose of including the mortgagee's address is to

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facilitate in the eventual discharge thereof, and also for purpose of any notice that may be sent to

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the mortgagor and mortgagee.

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     (b) The term “mortgagee,” for the purposes of this section, shall mean the payee or lender

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identified in the promissory note or other negotiable instrument as defined in chapter 6A-3 of the

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general laws, which is secured by the mortgage deed, and shall not mean a third party purporting

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to act as an agent or nominee. A mortgage naming a third party as the mortgagee who is not the

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named payee or lender on the underlying promissory note or other negotiable instrument, as

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defined in chapter 6A-3 of the general laws, secured by the mortgage shall be invalid for

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recording, and shall not be enforceable as a mortgage lien except as provided in section 34-11-45.

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A mortgage deed that identifies the mortgagee and also lists the name and address of the

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mortgagee’s servicer for the purposes of facilitating the eventual discharge of the mortgage and

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for the purpose of any notice that may be sent to the mortgagee shall be considered compliant

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with the mortgagee’s address requirements herein.

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     34-11-22. Statutory power of sale in mortgage. -- The following power shall be known

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as the "statutory power of sale" and may be incorporated in any mortgage by reference; provided,

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that a mortgage that does not comply with the mortgagee requirements set forth in sections 34-11-

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1.3 and 34-11-24 shall not be entitled to invoke the statutory power of sale:

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      (Power)

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      But if default shall be made in the performance or observance of any of the foregoing or

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other conditions, or if breach shall be made of the covenant for insurance contained in this deed,

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then it shall be lawful for the mortgagee or his, her or its executors, administrators, successors or

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assigns to sell, together or in parcels, all and singular the premises hereby granted or intended to

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be granted, or any part or parts thereof, and the benefit and equity of redemption of the mortgagor

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and his, her or its heirs, executors, administrators, successors and assigns therein, at public

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auction upon the premises, or at such other place, if any, as may be designated for that purpose in

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this deed, or in the published notice of sale first by mailing written notice of the time and place of

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sale by certified mail, return receipt requested, to the mortgagor, at his or her or its last known

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address, at least twenty (20) days for mortgagors other than individual consumer mortgagors, and

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at least thirty (30) days for individual consumer mortgagors, prior to first publishing the notice,

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including the day of the mailing in the computation; second, by publishing the same at least once

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each week for three (3) successive weeks in a public newspaper published daily in the city in

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which the mortgaged premises are situated; and if there be no public newspaper published daily

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in the city in which the mortgaged premises are situated, or if the mortgaged premises are not

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situated in a city, then (1) if the mortgaged premises are situated in the city of Central Falls, in a

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public newspaper published daily in the city of Pawtucket; (2) if the mortgaged premises are

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situated in the town of North Providence, in a public newspaper published daily in either the city

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of Providence or the city of Pawtucket; (3) if the mortgaged premises are situated in any of the

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towns of Cumberland, Lincoln, Smithfield or North Smithfield, in a public newspaper published

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daily in either the city of Pawtucket or Woonsocket; (4) if the mortgaged premises are situated in

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the county of Providence elsewhere than in the above-named cities and towns, in a public

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newspaper published daily in the city of Providence; (5) if the mortgaged premises are situated in

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the county of Newport, in a public newspaper published daily in the city of Newport; but if there

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be no such public newspaper so published, then in some public newspaper published anywhere in

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the county of Newport; (6) if the mortgaged premises are situated in any of the counties of

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Bristol, Kent or Washington, in a public newspaper published daily in the city or town in which

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the mortgaged premises are situated; but if there be no public newspaper so published, in some

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public newspaper published daily in the county in which the mortgaged premises are situated or

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in a public newspaper published daily in the city of Providence; provided however if the

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mortgaged premises are situated in the town of New Shoreham then in addition to publication in a

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public newspaper published daily as required above, it shall also be published in a public

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newspaper published in the town of New Shoreham, and, in the event there is no public

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newspaper published in the town of New Shoreham, then in a public newspaper distributed in the

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town of New Shoreham; with power to adjourn such sale from time to time, provided that

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publishing of the notice shall be continued, together with a notice of the adjournment or

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adjournments, at least once each week in that newspaper; and in his, her or its or their own name

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or names, or as the attorney or attorneys of the mortgagor, for that purpose by these presents duly

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authorized and appointed with full power of substitution and revocation to make, execute and

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deliver to the purchaser or purchasers at that sale a good and sufficient deed or deeds of the

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mortgaged premises in fee simple, and to receive the proceeds of such sale or sales, and from

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such proceeds to retain all sums hereby secured whether then due or to fall due thereafter, or the

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part thereof then remaining unpaid, and also the interest then due on the proceeds, together with

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all expenses incident to the sale or sales, or for making deeds hereunder, and for fees of counsel

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and attorneys, and all costs or expenses incurred in the exercise of such powers, and all taxes,

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assessments, and premiums for insurance, if any, either theretofore paid by the mortgagee or his

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or her executors, administrators or assigns, or then remaining unpaid, upon the mortgaged

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premises, rendering and paying the surplus of the proceeds of sale, if any there be, over and above

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the amounts so to be retained as aforesaid, together with a true and particular account of the sale

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or sales, expenses and charges, to the mortgagor, or his, her or its heirs, executors, administrators,

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successors or assigns; which sale or sales made as aforesaid shall forever be a perpetual bar

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against the mortgagor and his, her or its heirs, executors, administrators, successors and assigns,

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and all persons claiming the premises, so sold, by, through or under him or her, them or any of

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them.

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     34-11-24. Effect of assignment of mortgage. -- An assignment of mortgage

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substantially following the form entitled "Assignment of Mortgage" shall, when duly executed,

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have the force and effect of granting, bargaining, transferring and making over to the assignee, his

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or her heirs, executors, administrators, and assigns, the mortgage deed with the note and debt

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thereby secured, and all the right, title and interest of the mortgagee by virtue thereof in and to the

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estate described therein, to have and to hold the mortgage deed with the privileges and

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appurtenances thereof to the assignee, his or her heirs, executors, administrators and assigns in as

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ample manner as the assignor then holds the same, thereby substituting and appointing the

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assignee and his or her heirs, executors, administrators and assigns as the attorney or attorneys

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irrevocable of the mortgagor under and with all the powers in the mortgage deed granted and

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contained. Any transfer of the ownership of the beneficial interest in, or the right to enforce, a

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promissory note or other negotiable instrument as defined in chapter 6A-3 of the general laws

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secured by a mortgage must be accompanied by an assignment of the mortgage that is presented

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for recording with the applicable recording fee within thirty (30) days of the transfer, and the

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assignment of the mortgage must identify the party to whom the note or other negotiable

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instrument securing the mortgage has been assigned. The failure to present the mortgage

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assignment for recording within the time limits stated herein shall render the mortgage void, but

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shall not nullify the underlying indebtedness.

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     SECTION 3. Section 34-13-1 of the General Laws in Chapter 34-13 entitled "Recording

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Of Instruments" is hereby amended to read as follows:

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     34-13-1. Instruments eligible for recording. -- Any of the following instruments shall

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be recorded or filed by the town clerk or recorder of deeds, in the manner prescribed by law, on

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request of any person and on payment of the lawful fees therefor:

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     (1) Letters of attorney.

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     (2) All contracts for sale of land.

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     (3) Bonds for title or covenants or powers concerning lands, tenements and

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hereditaments.

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     (4) All notices to be filed under the provisions of section 9-4-9.

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     (5) All notices and process to be filed under other statutory provisions, and all decrees in

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equity and judgments at law affecting the title to land.

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     (6) All instruments evidencing or relating to a security interest in personal property or

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fixtures that may be filed pursuant to chapter 9 of title 6A.

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     (7) All instruments required by statute to be recorded, including deeds, mortgages and

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transfers and discharges thereof, leases or memoranda thereof, and transfers and cancellations

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thereof, and the covenants, conditions, agreements and powers therein contained provided that no

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mortgage or transfer thereof shall be recorded if the mortgage or transfer thereof does not comply

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with the requirements set forth in sections 34-11-1.3 and 34-11-24.

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     (8) Instruments of defeasance.

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     (9) Instruments (excepting wills) creating trusts.

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     (10) All instruments and notices, affecting, or purporting to affect, the title to land or any

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interest therein or giving or terminating the right to sever any building or part thereof or fixture,

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when signed and acknowledged as required for deeds.

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     (11) All affidavits as to family facts, including dates of birth, marriage, and death, which

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relate or purport to relate to title to land.

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     (12) All affidavits as to bounds and monuments of land.

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     (13) All certificates of the secretary of state as to change of corporate name.

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     (14) All original linen and/or original mylar maps, plats, surveys, and drawings, whether

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or not attached to, or a part of, another recordable instrument, Provided, however, That those

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requiring the approval of any council; commission, officer, or other body by law shall not be

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recorded without such approval.

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     All survey plans received for recording shall be drawn on archival mylar or linen, those

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of which shall not exceed a size of 24" x 36" and shall be recorded as originally drafted. Said

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plans shall contain as a minimum all items set forth in the "Procedural and Technical Standards

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for the practice of Land Surveying in the State of Rhode Island and Providence Plantations" as

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adopted by the Rhode Island Board of Registration of Professional Land Surveyors effective

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April 1, 1994 and any amendments or modifications thereof. Further, all plans must be able to be

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reproduced so that the contents of said plans are legible.

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     Indexes of survey plans shall be maintained indicating (a) the title of the plan; and (b) the

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street(s) or road(s) on which the subject property abuts. Such plans shall include a separate

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listing, in or attached to the legend on the plan, of all streets and roads on which the subject

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property abuts.

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     (15) All declarations of restrictions and covenants in connection with a plat of record or

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to be recorded or with a tract or parcel of land which is to be subdivided.

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     (16) Statements of covenants, conditions, and powers of sale which are intended to be

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incorporated in mortgages by reference.

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     SECTION 4. Section 34-26-8 of the General Laws in Chapter 34-26 entitled

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"Redemption, Release, and Transfer of Mortgages" is hereby amended to read as follows:

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     34-26-8. Release of mortgage -- Affidavit. -- (a) For purposes of this section:

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      (1) "Mortgage" means a mortgage upon any interest in real property located in the State

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of Rhode Island.

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      (2) "Person" means an individual, corporation, business trust, estate, trust, partnership,

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association, joint venture, government, governmental subdivision or agency, or other legal or

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commercial entity;

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      (3) "Mortgagor" means the grantor of a mortgage;

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      (4) "Mortgagee" means the grantee of a mortgage that meets the requirements of sections

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34-11-1.3 and 34-11-24; provided, if the mortgage has been assigned of record. "Mortgagee"

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means the last person to whom the mortgage has been assigned of record; provided further, if the

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mortgage has been serviced by a mortgage servicer, "Mortgagee" means the mortgage servicer;

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      (5) "Mortgage servicer" means the last person to whom the mortgagor has been

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instructed by the mortgagee to send payment of the mortgage. The person who has transmitted a

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payoff statement shall be deemed to be the mortgage servicer with respect to the mortgage

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described in that payoff statement;

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      (6) "Attorney-at-law" means any person admitted to practice law in this state and in good

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standing;

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      (7) "Title insurance company" means any corporation or other business entity authorized

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and licensed to transact the business of insuring titles to interests in real property in this state; and

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      (8) "Payoff statement" means a written statement of the amount of the unpaid balance on

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a mortgage, including principal, interest and other charges properly assessed pursuant to the loan

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documentation of such mortgage and of the interest on a per diem basis with respect to the unpaid

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principal balance of the mortgage.

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      (b) If a mortgagee fails to execute and deliver a release of mortgage to the mortgagor or

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to the mortgagor's designated agent within thirty (30) days from receipt of payment of the

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mortgage by the mortgagee in accordance with the payoff statement furnished by the mortgagee,

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any attorney-at-law or duly authorized officer of a title insurance company may, on behalf of the

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mortgagor or any transferee of the mortgagor who has acquired title to the premises described in

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the mortgage, execute and cause to be recorded in the land records of each city or town where the

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mortgage was recorded, an affidavit which complies with the requirements of this section.

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      (c) An affidavit pursuant to this section shall state that:

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      (1) The affiant is an attorney-at-law or the authorized officer of a title insurance

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company, and that the affidavit is made in behalf of and at the request of the mortgagor;

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      (2) The mortgagee has provided a payoff statement with respect to the loan secured by

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the mortgage;

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      (3) The affiant has ascertained that the mortgagee has received payment of the loan

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secured by the mortgage in accordance with the payoff statement, as evidence by a bank check,

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certified check or attorney's clients' funds account which has been negotiated by the mortgagee or

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by other documentary evidence of such receipt of payment by the mortgagee;

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      (4) More than sixty (60) days have elapsed since payment was received by the

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mortgagee; and

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      (5) The affiant has given the mortgagee at least thirty (30) days' notice in writing by

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certified mail, return receipt request and signed for and completed, of intention to execute and

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cause to be recorded an affidavit in accordance with this section with a copy of the proposed

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affidavit attached to such written notice, and that the mortgagee has not responded in writing to

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such notification, or that any request for additional payment made by the mortgagee has been

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complied with at least fifteen (15) days prior to the date of the affidavit.

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      (d) Such affidavit shall state the names of the mortgagor and the mortgagee, the date of

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the mortgage, and the volume and page of the land records where the mortgage is recorded. The

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affidavit shall give similar information with respect to any recorded assignment of the mortgage.

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      (e) The affiant shall attach to the affidavit:

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      (i) Photostatic copies of the documentary evidence that payment has been received by

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the mortgagee, including mortgagee's endorsement of any bank check, certified check or

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attorney's clients' funds account,

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      (ii) A photostatic copy of the written payoff statement and shall certify on each that it is

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a true copy of the original document, and

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      (iii) Evidence of mailing and receipt notice to mortgagee.

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      (f) Such affidavit, when recorded, shall be a release of the lien of such mortgage of the

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property described therein.

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      (g) The city or town clerk shall index the affidavit in the name of the mortgagor as

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grantor.

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      (h) Any person who causes an affidavit to be recorded in the land records of any city or

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town in accordance with this section knowing the information and statements therein contained to

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be false may be fined not more than a dollar amount that is double the face amount of the

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mortgage falsely discharged and shall make restitution to the affected mortgagee to the extent

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such mortgagee suffers direct financial loss due to said mortgage being falsely discharged.

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      (i) The provisions of this section shall not be applicable to mortgages securing lines of

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credit nor to any mortgage held by a financial institution incorporated under the laws of the state

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of Rhode Island or to any mortgage held by any financial institution organized under federal laws

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and maintaining a principal place of business within the state of Rhode Island or to any mortgage

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held by the Rhode Island Housing and Mortgage Finance Corporation.

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SECTION 5. This act shall take effect on July 1, 2013.

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LC01159/SUB A

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PROPERTY - FORMS AND EFFECT OF CONVEYANCES

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     This act would provide that all transfers of a mortgage interest on residential property be

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recorded so as to provide a clean chain of title for consumers to track the owner of their mortgage

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loans, and will render moot the question of standing of a nominee in foreclosure actions by

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discontinuing the practice of recording mortgages in the name of a party other than the holder of

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the note secured by the mortgage. This act would also require mortgage assignments be recorded

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within a certain time or render the mortgage void, but not nullify the underlying indebtedness.

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     This act would take effect on July 1, 2013.

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LC01159/SUB A

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