Chapter 238

2008 -- H 7149 SUBSTITUTE A AS AMENDED

Enacted 07/04/08

 

A N A C T

RELATING TO PROPERTY - MORTGAGE FORECLOSURE AND SALE

          

     Introduced By: Representatives Kilmartin, E Coderre, Rose, Dennigan, and San Bento

     Date Introduced: January 16, 2008

 

It is enacted by the General Assembly as follows:

 

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

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

 

     34-27-6. Payment of outstanding taxes. -- (a) In connection with any sale by public

auction made under and according to the provisions of any mortgage of real estate or any power

of sale contained therein or annexed thereto, if the mortgagee or an affiliate of the mortgagee is

the successful bidder for the real estate or property offered for sale, the foreclosure deed shall be

recorded in the records of land evidence for the municipality where the real estate is located

within forty-five (45) days after the date of the sale. The deed shall be captioned "foreclosure

deed" and the date of the foreclosure shall be stated in the deed. This subsection (a) shall not

apply to any such sale if, prior to the recording of the foreclosure deed: (1) the mortgagor files a

voluntary proceeding, or an order for relief is entered in any involuntary proceeding against the

mortgagor, under any federal or state bankruptcy or insolvency statute; or (2) the mortgagee

abandons or otherwise terminates such sale.

     (b) Notwithstanding any other general law or local ordinance to the contrary, the grantee

of real estate named in the foreclosure deed shall pay to the municipality, on or before the date

the foreclosure deed is recorded, all taxes and other assessments, including water charges, interest

and penalties, if any, which constitute liens on the real estate described in the foreclosure deed

and which are due and owing on the recording date (collectively, "taxes due and owing");

provided, however, that a grantee shall not be deemed in violation of this subsection (b) if the

grantee shall apply for a municipal lien certificate from the tax collector for the municipality

during the forty-five (45) day period ending on the day on which the foreclosure deed is recorded

and shall pay the taxes due and owing within thirty (30) days after the date on which the

municipal lien certificate is mailed by the tax collector by the United States mail, postage prepaid,

certified, return receipt requested, and addressed to the grantee at the address therefor set forth in

the application for the municipal lien certificate. Taxes due and owing for purposes of this

section shall include only installments thereof required by law to be paid as of the date the

foreclosure deed is recorded.

     (c) Upon a violation of any one or more of the requirements of this section, a penalty

shall accrue at the rate of forty dollars ($40.00) per month (in the aggregate) for each month or

part thereof during which such violation or violations continue. For purposes of determining the

penalty due hereunder, a month commences on the day on which the first such violation occurs

and a new month commences on the same day (or if there is no such day, then on the last day) of

each succeeding calendar month until all taxes due and owing are paid. In the event of a violation

of subsection (a), taxes due and owing shall be determined as of the date required thereunder for

the recording of a foreclosure deed.

     (d) As used in this section, the term "affiliate" shall mean, with respect to any mortgagee,

any individual or legal entity that controls, is controlled by or is under common control with such

mortgagee, and the term "foreclosure deed" shall mean the mortgagee's deed or other conveyance

of title to the successful bidder at any sale by public auction made under and according to the

provisions of any mortgage of real estate or any power of sale contained therein or annexed

thereto.

 

     SECTION 2. Section 19-9-2 of the General Laws in Chapter 19-9 entitled "Community

Obligations and Banking Offenses" is hereby amended to read as follows:

 

     19-9-2. Escrow accounts -- Interest. -- (a) Every mortgagee holding funds of a

mortgagor in escrow for the payment of taxes and insurance premiums with respect to mortgaged

property located in this state shall pay or credit interest on those funds at a rate of not less than

four percent (4%) per annum, which shall be credited annually on December 31. equal to the rate

paid to the mortgagee on its regular savings account, if offered, and otherwise at a rate not less

than the prevailing market rate of interest for regular savings accounts offered by local financial

institutions as determined by the director, said determination to be made within thirty (30) days of

the effective date of this provision and thereafter annually on the first business day of the year.

Said credit of interest shall accrue on the daily balance and be made annually on December 31. If

the mortgage debt is paid prior to December thirty-first in any year, the interest to the date of

payment shall be paid to the mortgagor. The provision of this section shall apply only with

respect to mortgages on owner-occupied residential property consisting of not more than four (4)

living units. The provisions of this section shall not be waived. No mortgagee holding the

mortgagor's funds in escrow for the payment of taxes shall also charge an annual "tax service fee"

or other annual fee for ascertaining whether or not the real estate taxes have in fact been paid.

Any mortgagee violating the provisions of this section shall be fined not more than one hundred

dollars ($100) for each offense.

      (b) Mortgages insured or guaranteed by the farmer's home loan administration, federal

housing administration, or the veterans' administration, or a private mortgage insurer licensed to

do business in the state of Rhode Island or made pursuant to the provisions of chapter 55 of title

42 shall be exempt from the requirements of this section.

      (c) The director or the director's designee shall adopt any regulations that are necessary

to carry out the provisions of this section.

 

     SECTION 3. Section 1 of this act shall take effect sixty (60) days after passage and shall

apply to foreclosure auction sales occurring after the date on which section 1 takes effect.

Sections 2 and 3 of this act shall take effect upon passage, provided that the rate of interest

payable under section 19-9-2 shall change as of the date of determination by the director of the

prevailing market rate of interest.

     

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LC00524/SUB A/2

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