2013 -- S 0416

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LC01016

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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 -- MORTGAGE AND FORECLOSURE SALE

     Introduced By: Senators Nesselbush, Crowley, Cool Rumsey, Goldin, and Conley

     Date Introduced: February 26, 2013

     Referred To: Senate Judiciary

It is enacted by the General Assembly as follows:

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     SECTION 1. Chapter 34-27 of the General Laws entitled "Mortgage Foreclosure and

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

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     34-27-3.2. Conciliation conference. -- (a) Definitions. The following definitions apply to

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the provisions of this section. unless the context requires another meaning:

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     (1) "Conciliation conference" means a conference involving the mortgagee and

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mortgagor, coordinated and facilitated by an conciliation coordinator, to facilitate a loan workout

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or other solution in an effort to avoid foreclosure and permit the mortgagor, where possible, to

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remain in the property.

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     (2) "Conciliation coordinator" means a person designated by a Rhode Island based HUD-

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approved counseling agency to serve as the independent coordinator and facilitator of the

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conciliation conference, provided that such person possesses the experience and qualifications

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established by the department.

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     (3) "Department" means the department of business regulation.

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     (4) "Good faith" means that the mortgagee deals honestly and fairly with the mortgagor

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and the conciliation coordinator with an honest intent to act towards achieving the goal of

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avoiding foreclosure, as evidenced by some or all of the following factors:

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     (i) Mortgagee provided notice as required by this section;

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     (ii) Mortgagee designated an agent to participate in the conciliation conference on its

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behalf, and with the authority to agree to a work-out agreement on its behalf;

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     (iii) Mortgagee made reasonable efforts to respond in a timely manner to a request for

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information from the conciliation coordinator, mortgagor, or counselor assisting the mortgagor;

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     (iv) Mortgagee declines to accept the mortgagor’s work-out proposal and the mortgagee

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provided a detailed statement, in writing, of its reasons for rejecting the proposal;

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     (vi) Where a mortgagee declines to accept the mortgagor’s work-out proposal, the

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mortgagee offered, in writing, to enter into an alternative work-out proposal that would result in

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net financial benefit to the mortgagor as compared to the terms of the mortgage; or

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     (vii) Any other factor determined by the conciliation coordinator to establish good faith.

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     (5) "HUD" means the United States department of housing and urban development and

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any successor to such department.

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     (6) "Mortgage" means an individual consumer mortgage on any owner-occupied, one to

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four (4) unit residential property.

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     (7) "Mortgagee" means the holder of a mortgage.

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     (8) "Mortgagor" means the owner of the property subject to a mortgage.

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     (b) No mortgagee may initiate any foreclosure of real estate pursuant to subsection 34-

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27-4(b) unless the requirements of this section have been met.

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     (c) When a mortgage is not more than one hundred twenty (120) days delinquent, the

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mortgagee shall provide to the mortgagor written notice, by certified and first class mail at the

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address of the real estate and, if different, at the address designated by the mortgagor by written

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notice to the mortgagee as the mortgagor's address for receipt of notices, that the mortgagee may

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not foreclose on the mortgaged property without first participating in good faith in a conciliation

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conference. The notice shall be provided to the clerk or recorder of deeds for the city or town in

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which the property is located.

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     (d) A form of written notice meeting the requirements of this section shall be

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promulgated by the department for use by mortgagees at least thirty (30) days prior to the

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effective date of this section. The written notice required by this section shall be in English and

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Spanish, reference the property’s plat and lot information, and may be combined with any other

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notice required under this chapter or pursuant to state or federal law. The written notice shall

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provide the mortgagor the opportunity to receive an additional written notice in another language

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if necessary.

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     (e) The conciliation conference shall take place in person, or by telephone, at a time and

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place deemed mutually convenient for the parties by an individual employed by a HUD-approved

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independent counseling agency selected by the mortgagee to serve as a conciliation coordinator,

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but not later than sixty (60) days following the mailing of the notice. The mortgagor shall

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cooperate in all respects with the conciliation coordinator including, but not limited to, providing

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all necessary financial and employment information and completing any and all loan resolution

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proposals and applications deemed appropriate by the conciliation coordinator. A conciliation

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conference between the mortgagor and mortgagee conducted by a conciliation coordinator shall

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be provided at no cost to the mortgagor. The HUD-approved counseling agency shall be

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compensated by the mortgagee.

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     (f) If, after two (2) attempts by the conciliation coordinator to contact the mortgagor, the

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mortgagor fails to respond to the conciliation coordinator’s request to appear at a conciliation

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conference, or the mortgagor fails to cooperate in any respect with the requirements of this

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section, the requirements of the section shall be deemed satisfied upon verification by the

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conciliation coordinator that the required notice was sent. Upon verification, a certificate will be

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issued immediately by the conciliation coordinator authorizing the mortgagee to proceed with the

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foreclosure action, including recording the deed. Any certificate issued pursuant to this subsection

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shall be valid for one hundred twenty (120) days. Such certificate shall be recorded along with the

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foreclosure deed. A form of certificate meeting the requirements of this section shall be

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promulgated by the department for use by mortgagees at least thirty (30) days prior to the

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effective date of this section.

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     (g) If the conciliation coordinator determines that after a good faith effort made by the

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mortgagee at the conciliation conference, the parties cannot come to an agreement to renegotiate

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the terms of the loan in an effort to avoid foreclosure: such good faith effort by the mortgagee

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shall be deemed to satisfy the requirements of this section. A certificate certifying such good faith

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effort will be promptly issued by the conciliation coordinator authorizing the mortgagee to

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proceed with the foreclosure action and recording of the foreclosure deed. Any certificate issued

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pursuant to this subsection shall be valid for one hundred twenty (120) days. Such certification

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shall be recorded along with the foreclosure deed. A form of certificate meeting the requirements

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of this section shall be promulgated by the department for use by mortgagees at least thirty (30)

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days prior to the effective date of this section.

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     (h) If the mortgagee and mortgagor are able to reach agreement to renegotiate the terms

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of the loan to avoid foreclosure, the agreement shall be reduced to writing, executed by the

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mortgagor and mortgagee, and notice of the agreement shall be provided to the clerk or recorder

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of deeds for the city or town in which the property is located by the mortgagee.

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     (i) Notwithstanding any other provisions of this section, where a mortgagor and

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mortgagee have entered into a written agreement and the mortgagor fails to fulfill his or her

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obligations under the written agreement, the provisions of this section shall not apply to any

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foreclosure initiated under this chapter within nine (9) months following the execution of the

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written agreement. In such case, the mortgagee shall include in the foreclosure deed an affidavit

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establishing its right to proceed under the subsection.

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     (j) Foreclosures involving real property which is not owner-occupied or is not a one to

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four (4) unit residential property are not subject to this section.

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     (k) Notwithstanding any other provisions of this section, any mortgagee which is

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headquartered within the state and which services its own mortgages shall be deemed to be in

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compliance with the requirements of this section if:

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     (l) The mortgagee provides mortgagors a forbearance relief program that is consistent

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with the forbearance relief requirements applicable to FHA-insured mortgages, as set forth in

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Chapter 8 of HUD Handbook 4330.1 Rev. 5, administration of insured home mortgages, as the

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same may be amended from time to time; and

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     (2) The deed offered by a mortgagee to be filed with the city or town recorder of deeds as

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a result of a mortgage foreclosure action contained a certification that the provisions of this

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subsection have been satisfied.

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     (l) No deed offered by a mortgagee as a result of a mortgage foreclosure action shall be

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submitted to a city or town recorder of deeds for recording in the land evidence records of the city

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or town until and unless the requirements of this section are met. The mortgagee shall include in

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the foreclosure deed an affidavit of compliance with this section. Failure of the mortgagee to

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comply with the requirements of this section shall render the foreclosure void, without limitation

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of the right of the mortgagee thereafter to re-exercise its power of sale or other means of

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foreclosure upon compliance with this section. The rights of the mortgagor to any redress

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afforded under the law are not abridged by this section.

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     SECTION 2. This act shall take effect sixty (60) days following passage.

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LC01016

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PROPERTY -- MORTGAGE AND FORECLOSURE SALE

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     This act would require a mortgagee to participate in good faith in a conciliation

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conference prior to initiating foreclosure proceedings. This act would apply only to individual

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consumer mortgages on any owner-occupied, one to four (4) unit residential property.

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     This act would take effect sixty (60) days following passage.

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LC01016

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