2013 -- H 5335

=======

LC00956

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

____________

A N A C T

RELATING TO PROPERTY -- MORTGAGE AND FORECLOSURE SALE

     Introduced By: Representatives Gallison, Marshall, O'Brien, Edwards, and Silva

     Date Introduced: February 07, 2013

     Referred To: House Judiciary

It is enacted by the General Assembly as follows:

1-1

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

1-2

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

1-3

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

1-4

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

1-5

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

1-6

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

1-7

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

1-8

remain in the property.

1-9

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

1-10

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

1-11

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

1-12

established by the department.

1-13

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

1-14

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

1-15

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

1-16

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

1-17

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

1-18

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

1-19

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

2-20

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

2-21

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

2-22

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

2-23

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

2-24

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

2-25

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

2-26

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

2-27

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

2-28

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

2-29

any successor to such department.

2-30

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

2-31

four (4) unit residential property.

2-32

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

2-33

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

2-34

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

2-35

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

2-36

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

2-37

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

2-38

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

2-39

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

2-40

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

2-41

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

2-42

which the property is located.

2-43

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

2-44

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

2-45

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

2-46

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

2-47

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

2-48

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

2-49

if necessary.

2-50

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

2-51

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

2-52

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

2-53

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

2-54

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

3-1

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

3-2

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

3-3

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

3-4

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

3-5

compensated by the mortgagee.

3-6

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

3-7

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

3-8

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

3-9

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

3-10

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

3-11

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

3-12

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

3-13

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

3-14

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

3-15

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

3-16

effective date of this section.

3-17

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

3-18

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

3-19

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

3-20

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

3-21

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

3-22

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

3-23

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

3-24

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

3-25

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

3-26

days prior to the effective date of this section.

3-27

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

3-28

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

3-29

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

3-30

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

3-31

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

3-32

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

3-33

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

3-34

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

4-1

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

4-2

establishing its right to proceed under the subsection.

4-3

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

4-4

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

4-5

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

4-6

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

4-7

compliance with the requirements of this section if:

4-8

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

4-9

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

4-10

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

4-11

same may be amended from time to time; and

4-12

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

4-13

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

4-14

subsection have been satisfied.

4-15

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

4-16

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

4-17

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

4-18

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

4-19

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

4-20

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

4-21

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

4-22

afforded under the law are not abridged by this section.

4-23

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

=======

LC00956

=======

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PROPERTY -- MORTGAGE AND FORECLOSURE SALE

***

5-1

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

5-2

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

5-3

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

5-4

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

=======

LC00956

=======