Providence Law Aims to Ease Foreclosure Pains

By Kristen Sherman, Attorney at Adler Pollock & Sheehan and Rebecca Carey, student at Roger William Law School

In response to the current economic crisis which resulted in a sharp increase in the number of foreclosures in Providence, as well as an increased unemployment rate in Rhode Island, Providence Mayor David N. Cicilline and the City Council have taken action.

Two City of Providence ordinances were approved on July 27, 2009 that offer temporary relief to renters and homeowners who currently live in foreclosed homes. According to the City, Providence’s foreclosure rates have risen dramatically in the past few years from 303 in 2006 to 718 in 2007 and it reached a high of 1,577 in 2008.

Neighborhoods have become neglected and abandoned; property values have been decreasing, and crime levels have been rising. Quality of life in Rhode Island, particularly in urban areas, has been negatively affected by the economic downturn. However, with the enactment of two new ordinances, one to protect renters, and the other to require institutions to enter into mediation with homeowners before foreclosing on property, cities like Providence are offering residents some additional protections.

Under one ordinance (No.341), “bona fide tenants” (those who have entered into a written or oral rental agreement with a homeowner or landlord no less than thirty (30) days prior to the foreclosure of the property) cannot be forced to leave their home unless or until the following series of actions are taken: (1)essential services such as heat, running water and electricity, must continue to be provided by any successor in interest under the same terms and conditions as the foreclosed mortgagor. (2)the new owner has notified each “bona fide tenant” in writing in both English and Spanish that the property is for sale, and the new owner’s personal information has been provided so that the “bona fide tenant” will know to whom rent must be paid; (3) if a tenant had a month-to-month tenancy, that tenancy will continue as such. If there was a written rental agreement for a fixed period of time, the “bona fide tenant” may remain in his/her home for the duration specified in the written agreement; and (4) in addition to the notice of sale, a lender/ mortgager who is foreclosing the property must inform the “bona fide tenant” of the date, time, and place of sale, the address and telephone number of Rhode Island Legal Services, and the name, address, and telephone number of HUD-approved counseling agencies in Rhode Island. No “bona fide tenant” maybe removed from his/her home until these obligations have been fulfilled by the lender/mortgager that is foreclosing on the property.

A second Providence ordinance (No. 340) was enacted to allow homeowners a period of time to explore their rights and options and possibly find a way to keep their homes when a foreclosure is threatened. Although the ordinance applies to residences that are owner-occupied, it does not exclude dwellings where renters also live. On the contrary, it covers residences where the homeowner rents up to four units within their property, provided that the owner maintains his or her residence within the same building.

Under the ordinance, lenders must give simultaneous notice to both the homeowner and the City of the intent to foreclose. The notice must be filed in the land evidence records. The homeowner is then assigned a loan counselor through an approved HUD independent counseling agency, to whom he or she must provide necessary financial and employment information. Within 21 days following the filing of this notice, the lender and homeowner participate in a “loan/mortgage conference.” If the homeowner fails to respond to the request for mediation, he or she waives the right and the HUD-approved independent counseling agency will authorize the lender to foreclose on the property. A property may be foreclosed upon even after mediation, if a good faith effort was made, but the negotiations were fruitless. This entire mediation process must be completed within 60 days from the filing of the initial notice of foreclosure.

While the new City ordinances do not ultimately prevent an impending foreclosure from occurring, they offer temporary relief to homeowners and renters by forestalling immediate foreclosure and eviction and allowing renters and owners a period of time to investigate and pursue options for keeping their homes or finding alternative housing. The ordinances take effect on October 1, 2009. After that date, homeowners in foreclosure who would like to arrange a remediation conference should contact Rhode Island Housing at (401) 457-1234 and renters seeking protection under the new ordinance should contact the Brenda Carcieri in the City Solicitor’s office at (401) 421-7740 ext. 333.

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