2021 -- S 0424 | |
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LC001316 | |
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STATE OF RHODE ISLAND | |
IN GENERAL ASSEMBLY | |
JANUARY SESSION, A.D. 2021 | |
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A N A C T | |
RELATING TO PROPERTY -- MORTGAGE FORECLOSURE AND SALE | |
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Introduced By: Senators Quezada, Mack, and Bell | |
Date Introduced: February 25, 2021 | |
Referred To: Senate Judiciary | |
It is enacted by the General Assembly as follows: | |
1 | SECTION 1. Section 34-27-3.2 of the General Laws in Chapter 34-27 entitled "Mortgage |
2 | Foreclosure and Sale" is hereby amended to read as follows: |
3 | 34-27-3.2. Mediation conference. |
4 | (a) Statement of policy. It is hereby declared that residential mortgage foreclosure actions, |
5 | caused in part by unemployment and underemployment, have negatively impacted a substantial |
6 | number of homeowners throughout the state, creating a situation that endangers the economic |
7 | stability of many of the citizens of this state as the increasing numbers of foreclosures lead to |
8 | increases in unoccupied and unattended buildings and the unwanted displacement of homeowners |
9 | and tenants who desire to live and work within the state. |
10 | (b) Purpose. The statutory framework for foreclosure proceedings is prescribed under the |
11 | provisions of chapter 27 of this title. As the need for a mortgage mediation process has evolved, it |
12 | is important for the state to develop a standardized, statewide process for foreclosure mediation |
13 | rather than a process based on local ordinances that may vary from municipality to municipality. |
14 | By providing a uniform standard for an early HUD-approved, independent counseling process in |
15 | owner-occupied principal residence mortgage foreclosure cases, the chances of achieving a positive |
16 | outcome for homeowners and lenders will be enhanced. |
17 | (c) Definitions. The following definitions apply in the interpretations of the provisions of |
18 | this section unless the context requires another meaning: |
19 | (1) "Default" means the failure of the mortgagor to make a timely payment of an amount |
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1 | due under the terms of the mortgage contract, which failure has not been subsequently cured. |
2 | (2) "Department" means the department of business regulation. |
3 | (3) "Good faith" means that the mortgagor and mortgagee deal honestly and fairly with the |
4 | mediation coordinator with an intent to determine whether an alternative to foreclosure is |
5 | economically feasible for the mortgagor and mortgagee, as evidenced by some or all of the |
6 | following factors: |
7 | (i) Mortgagee provided notice as required by this section; |
8 | (ii) Mortgagee designated an agent to participate in the mediation conference on its behalf |
9 | and with the authority to agree to a work-out agreement on its behalf; |
10 | (iii) Mortgagee made reasonable efforts to respond in a timely manner to requests for |
11 | information from the mediation coordinator, mortgagor, or counselor assisting the mortgagor; |
12 | (iv) Mortgagee declined to accept the mortgagor's work-out proposal, if any, and the |
13 | mortgagee provided a detailed statement, in writing, of its reasons for rejecting the proposal; |
14 | (v) Where a mortgagee declined to accept the mortgagor's work-out proposal, the |
15 | mortgagee offered, in writing, to enter into an alternative work-out/disposition resolution proposal |
16 | that would result in net financial benefit to the mortgagor as compared to the terms of the mortgage. |
17 | (4) "HUD" means the United States Department of Housing and Urban Development and |
18 | any successor to such department. |
19 | (5) "Mediation conference" means a conference involving the mortgagee and mortgagor, |
20 | coordinated and facilitated by a mediation coordinator whose purpose is to determine whether an |
21 | alternative to foreclosure is economically feasible to both the mortgagee and the mortgagor, and if |
22 | it is determined that an alternative to foreclosure is economically feasible, to facilitate a loan |
23 | workout or other solution in an effort to avoid foreclosure. |
24 | (6) "Mediation coordinator" means a person employed by a Rhode Island-based, HUD- |
25 | approved counseling agency designated to serve as the unbiased, impartial, and independent |
26 | coordinator and facilitator of the mediation conference, with no authority to impose a solution or |
27 | otherwise act as a consumer advocate, provided that such person possesses the experience and |
28 | qualifications established by the department. |
29 | (7) "Mortgage" means an individual consumer first-lien mortgage on any owner-occupied, |
30 | one (1)- to four (4)- unit residential property that serves as the mortgagor's primary residence. |
31 | (8) "Mortgagee" means the holder of a mortgage, or its agent or employee, including a |
32 | mortgage servicer acting on behalf of a mortgagee. |
33 | (9) "Mortgagor" means the person who has signed a mortgage in order to secure a debt or |
34 | other duty, or the heir or devisee of such person provided that: |
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1 | (i) The heir or devisee occupies the property as his or her primary residence; and |
2 | (ii) The heir or devisee has record title to the property, or a representative of the estate of |
3 | the mortgagor has been appointed with authority to participate in a mediation conference. |
4 | (d) The mortgagee shall, prior to initiation of foreclosure of real estate pursuant to § 34- |
5 | 27-4(b), provide to the mortgagor written notice at the address of the real estate and, if different, at |
6 | the address designated by the mortgagor by written notice to the mortgagee as the mortgagor's |
7 | address for receipt of notices, that the mortgagee may not foreclose on the mortgaged property |
8 | without first participating in a mediation conference. Notice addressed and delivered as provided |
9 | in this section shall be effective with respect to the mortgagor and any heir or devisee of the |
10 | mortgagor. |
11 | (1) If the mortgagee fails to mail the notice required by this subsection to the mortgagor |
12 | within one hundred twenty (120) days after the date of default, it shall pay a penalty at the rate of |
13 | one thousand ($1,000) per month for each month or part thereof, with the first month commencing |
14 | on the one hundred twenty-first (121st) day after the date of default and a new month commencing |
15 | on the same day (or if there is no such day, then on the last day) of each succeeding calendar month |
16 | until the mortgagee sends the mortgagor written notice as required by this section. |
17 | Notwithstanding the foregoing, any penalties assessed under this subsection for any failure |
18 | of any mortgagee to provide notice as provided herein during the period from September 13, 2013, |
19 | through the effective date of this section shall not exceed the total amount of one hundred twenty- |
20 | five thousand dollars ($125,000) for such mortgagee. |
21 | (2) Penalties accruing pursuant to subsection (d)(1) shall be paid to the mediation |
22 | coordinator prior to the completion of the mediation process. All penalties accrued under this |
23 | section shall be transferred to the state within one month of receipt by the mediation coordinator |
24 | and deposited to the restricted-receipt account within the general fund established by § 42-128-2(3) |
25 | and used for the purposes set forth therein. |
26 | (3) Issuance by the mediation coordinator of a certificate authorizing the mortgagee to |
27 | proceed to foreclosure, or otherwise certifying the mortgagee's good-faith effort to comply with the |
28 | provisions of this section, shall constitute conclusive evidence that, to the extent that any penalty |
29 | may have accrued pursuant to subsection (d)(1), the penalty has been paid in full by the mortgagee. |
30 | (4) Notwithstanding any other provisions of this subsection, a mortgagee shall not accrue |
31 | any penalty if the notice required by this subsection is mailed to the borrower: |
32 | (i) Within sixty (60) days after the date upon which the loan is released from the protection |
33 | of the automatic stay in a bankruptcy proceeding, or any similar injunctive order issued by a state |
34 | or federal court, or within sixty (60) days after a loan is no longer afforded protection under the |
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1 | Servicemembers Civil Relief Act (50 U.S.C. § 3901 et seq.) or the provisions of § 34-27-4(d), or |
2 | within one hundred twenty (120) days of the date on which the mortgagor initially failed to comply |
3 | with the terms of an eligible workout agreement, as hereinafter defined; and |
4 | (ii) The mortgagee otherwise complies with the requirements of subsection (d); provided, |
5 | however, that if the mortgagee fails to mail the notice required by subsection (d) to the mortgagor |
6 | within the time frame set forth in subsection (d)(4)(i), the mortgagee shall pay a penalty at the rate |
7 | of one thousand dollars ($1,000) per month for each month, or part thereof, with the first month |
8 | commencing on the thirty-first (31st) day after the date upon which the loan is released from the |
9 | protection of the automatic stay in a bankruptcy proceeding or any similar injunctive order issued |
10 | by a state or federal court and a new month commencing on the same day (or if there is no such |
11 | day, then on the last day) of each succeeding calendar month until the mortgagee sends the |
12 | mortgagor written notice as required by this section. Notwithstanding the foregoing, any penalties |
13 | assessed under this subsection for any failure of any mortgagee to provide notice as provided herein |
14 | during the period from September 13, 2013, through the effective date of this section shall not |
15 | exceed the total amount of one hundred twenty-five thousand dollars ($125,000) for such |
16 | mortgagee. |
17 | (5) Notwithstanding any other provisions of this section, a mortgagee may initiate a judicial |
18 | foreclosure in accordance with § 34-27-1. |
19 | (e) A form of written notice meeting the requirements of this section shall be promulgated |
20 | by the department for use by mortgagees at least thirty (30) days prior to the effective date of this |
21 | section. The written notice required by this section shall be in English, Portuguese, and Spanish |
22 | and may be combined with any other notice required under this chapter or pursuant to state or |
23 | federal law. |
24 | (f) The mediation conference shall take place in person, or over the phone, at a time and |
25 | place deemed mutually convenient for the parties by an individual employed by a HUD-approved, |
26 | independent counseling agency selected by the mortgagee to serve as a mediation coordinator, but |
27 | not later than sixty (60) days following the mailing of the notice. The mortgagor shall cooperate in |
28 | all respects with the mediation coordinator including, but not limited to, providing all necessary |
29 | financial and employment information and completing any and all loan resolution proposals and |
30 | applications deemed appropriate by the mediation coordinator. A mediation conference between |
31 | the mortgagor and mortgagee conducted by a mediation coordinator shall be provided at no cost to |
32 | the mortgagor. The HUD-approved counseling agency shall be compensated by the mortgagee for |
33 | mediation conferences that take place at a rate not to exceed five hundred dollars ($500) per |
34 | mediation. The HUD-approved agency shall be entitled to a filing fee not to exceed one hundred |
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1 | dollars ($100) per mediation engagement, provided that fifty dollars ($50.00) of the filing fee shall |
2 | be forwarded to Rhode Island Legal Services. |
3 | (g) If, after two (2) attempts by the mediation coordinator to contact the mortgagor, the |
4 | mortgagor fails to respond to the mediation coordinator's request to appear at a mediation |
5 | conference, or the mortgagor fails to cooperate in any respect with the requirements of this section, |
6 | the requirements of the section shall be deemed satisfied upon verification by the mediation |
7 | coordinator that the required notice was sent and any penalties accrued pursuant to subsection (d)(1) |
8 | and any payments owed pursuant to subsection (f) have been paid. Upon verification, a certificate |
9 | will be issued immediately by the mediation coordinator authorizing the mortgagee to proceed with |
10 | the foreclosure action, including recording the deed. Such certificate shall be valid until the earlier |
11 | of: |
12 | (1) The curing of the default condition; or |
13 | (2) The foreclosure of the mortgagor's right of redemption. |
14 | The certificate shall be recorded along with the foreclosure deed. A form of certificate |
15 | meeting the requirements of this section shall be promulgated by the department for use by |
16 | mortgagees at least thirty (30) days prior to the effective date of this section. |
17 | (h) If the mediation coordinator determines that after a good-faith effort made by the |
18 | mortgagee at the mediation conference, the parties cannot come to an agreement to renegotiate the |
19 | terms of the loan in an effort to avoid foreclosure, such good-faith effort by the mortgagee shall be |
20 | deemed to satisfy the requirements of this section. A certificate certifying such good-faith effort |
21 | will be promptly issued by the mediation coordinator authorizing the mortgagee to proceed with |
22 | the foreclosure action and recording of the foreclosure deed; provided, however, that the mediation |
23 | coordinator shall not be required to issue such a certificate until any penalties accrued pursuant to |
24 | subsections (d)(1) and (d)(4)(ii), and any payments owed pursuant to subsection (f), have been paid. |
25 | Such certification shall be valid until the earlier of: |
26 | (1) The curing of the default condition; or |
27 | (2) The foreclosure of the mortgagor's equity of redemption. |
28 | The certificate shall be recorded along with the foreclosure deed. A form of certificate |
29 | meeting the requirements of this section shall be promulgated by the department for use by |
30 | mortgagees at least thirty (30) days prior to the effective date of this section. |
31 | (i) If the mortgagee and mortgagor are able to reach agreement to renegotiate the terms of |
32 | the loan to avoid foreclosure, the agreement shall be reduced to writing and executed by the |
33 | mortgagor and mortgagee. If the mortgagee and mortgagor reach agreement after the notice of |
34 | mediation conference is sent to the mortgagor, but without the assistance of the mediation |
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1 | coordinator, the mortgagee shall provide a copy of the written agreement to the mediation |
2 | coordinator. Upon receipt of a written agreement between the mortgagee and mortgagor, the |
3 | mediation coordinator shall issue a certificate of eligible workout agreement if the workout |
4 | agreement would result in a net financial benefit to the mortgagor as compared to the terms of the |
5 | mortgage ("Certificate of Eligible Workout Agreement"). For purposes of this subsection, evidence |
6 | of an agreement shall include, but not be limited to, evidence of agreement by both mortgagee and |
7 | mortgagor to the terms of a short sale or a deed in lieu of foreclosure, regardless of whether said |
8 | short sale or deed in lieu of foreclosure is subsequently completed. |
9 | (j) Notwithstanding any other provisions of this section, where a mortgagor and mortgagee |
10 | have entered into a written agreement and the mediation coordinator has issued a certificate of |
11 | eligible workout agreement as provided in subsection (i), if the mortgagor fails to fulfill his or her |
12 | obligations under the eligible workout agreement, the provisions of this section shall not apply to |
13 | any foreclosure initiated under this chapter within twelve (12) months following the date of the |
14 | eligible workout agreement. In such case, the mortgagee shall include in the foreclosure deed an |
15 | affidavit establishing its right to proceed under this section. |
16 | (k) This section shall apply only to foreclosure of mortgages on owner-occupied, |
17 | residential real property with no more than four (4) dwelling units that is the primary dwelling of |
18 | the mortgagor and not to mortgages secured by other real property. |
19 | (l) Notwithstanding any other provisions of this section, any locally based mortgagees shall |
20 | be deemed to be in compliance with the requirements of this section if: |
21 | (1) The mortgagee is headquartered in Rhode Island; or |
22 | (2) The mortgagee maintains a physical office, or offices, exclusively in Rhode Island from |
23 | which office, or offices, it carries out full-service mortgage operations, including the acceptance |
24 | and processing of mortgage payments and the provision of local customer service and loss |
25 | mitigation and where Rhode Island staff have the authority to approve loan restructuring and other |
26 | loss mitigation strategies; and |
27 | (3) The deed offered by a mortgagee to be filed with the city or town recorder of deeds as |
28 | a result of a mortgage foreclosure action under power of sale contained a certification that the |
29 | provisions of this section have been satisfied. |
30 | (m) No deed offered by a mortgagee as a result of a mortgage foreclosure action under |
31 | power of sale shall be submitted to a city or town recorder of deeds for recording in the land |
32 | evidence records of the city or town until and unless the requirements of this section are met. Failure |
33 | of the mortgagee to comply with the requirements of this section shall render the foreclosure |
34 | voidable, without limitation of the right of the mortgagee thereafter to re-exercise its power of sale |
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1 | or other means of foreclosure upon compliance with this section. The rights of the mortgagor to |
2 | any redress afforded under the law are not abridged by this section. |
3 | (n) Any existing municipal ordinance or future ordinance that requires a conciliation or |
4 | mediation process as a precondition to the recordation of a foreclosure deed shall comply with the |
5 | provisions set forth herein and any provisions of said ordinances that do not comply with the |
6 | provisions set forth herein shall be determined to be unenforceable. |
7 | (o) The provisions of this section shall not apply if: |
8 | (1) The mortgage is a reverse mortgage as described in chapter 25.1 of this title; or |
9 | (2) The date of default under the mortgage is on or before May 16, 2013. |
10 | (p) Limitations on actions. Any person who claims that a foreclosure is not valid due to the |
11 | mortgagee's failure to comply with the terms of this section shall have one year from the date that |
12 | the first notice of foreclosure was published to file a complaint in the superior court for the county |
13 | in which the property is located and shall also file in the records of land evidence in the city or town |
14 | where the land subject to the mortgage is located a notice of lis pendens, the complaint to be filed |
15 | on the same day as the notice of lis pendens or within seven (7) days thereafter. Failure to file a |
16 | complaint, record the notice of lis pendens, and serve the mortgagee within the one-year period |
17 | shall preclude said mortgagor, or any other person claiming an interest through a mortgagor, from |
18 | subsequently challenging the validity of the foreclosure. Issuance by the mediation coordinator of |
19 | a certificate authorizing the mortgagee to proceed to foreclosure, or otherwise certifying the |
20 | mortgagee's good-faith effort to comply with the provisions of this section, shall constitute a |
21 | rebuttable presumption that the notice requirements of subsection (d) have been met in all respects. |
22 | SECTION 2. This act shall take effect upon passage. |
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LC001316 | |
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EXPLANATION | |
BY THE LEGISLATIVE COUNCIL | |
OF | |
A N A C T | |
RELATING TO PROPERTY -- MORTGAGE FORECLOSURE AND SALE | |
*** | |
1 | This act would provide that fifty dollars ($50.00) of the filing fee paid to the HUD- |
2 | approved agency for the mediation conference involving the mortgagee and mortgagor, shall be |
3 | paid to the Rhode Island Legal Services. |
4 | This act would take effect upon passage. |
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LC001316 | |
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