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Monday, July 22, 2019

R.I. AG: Legislation requires loan servicers to engage in conciliation process

By Jessica M. Karmasek | Mar 19, 2013

PROVIDENCE, R.I. (Legal Newsline) -- Rhode Island Attorney General Peter Kilmartin has filed legislation requiring mortgage service providers to "participate in good faith" in a conciliation process administered by a federally-approved independent agency.

The goal of the legislation, introduced last month, is to facilitate an agreement between the lender and homeowner that will avoid a foreclosure.

The measure -- House Bill 5335 and Senate Bill 0416 -- was scheduled for a hearing on Tuesday before the House Judiciary Committee.

The legislation serves to protect homeowners by requiring loan servicers to engage a conciliation conference coordinator at an independent counseling agency approved by the U.S. Department of Housing and Urban Development, or HUD, prior to finalizing the foreclosure process.

By requiring participation in a conciliation process, the homeowner has an opportunity to directly engage a representative of the lender, which often results in an agreement that avoids foreclosure.

"The goal of this legislation is to provide a consistent, effective conciliation effort to offer homeowners an opportunity to work directly with their lender on a work-out solution while learning about programs that may assist them in keeping their homes," Kilmartin said Tuesday.

"It is beneficial for the homeowner, the mortgage service provider and the community at large to find a way to keep people in their homes."

The legislation is similar to ordinances adopted by Providence, Cranston, Warwick and Warren in response to the increasing number of foreclosed properties in those municipalities, the attorney general explained.

Kilmartin said the measure incorporates "lessons learned" from the success of programs established by the four municipalities by making conciliation available to the homeowner earlier in the foreclosure process before the homeowner becomes too far delinquent.

This will increase the chances of a successful resolution, he said.

In addition, by establishing a uniform process applicable throughout the state, Kilmartin said the legislation will benefit lenders, who now are required to follow different rules in communities that have or may adopt similar foreclosure prevention ordinances.

In particular, the legislation exempts local lenders that service their mortgages, and offers homeowners a forbearance relief program that is consistent with the forbearance relief requirements applicable to Federal Housing Administration-insured mortgages.

The conciliation conference is offered at no cost to the homeowner or the state, Kilmartin said.

The attorney general argues that housing counseling combined with a conciliation conference is one of the most effective ways to help homeowners avoid foreclosure.

"As I said many times when the national mortgage foreclosure settlement was announced, the breadth and complexity of issues posed by the national mortgage crisis are staggering, and it will take a great deal of effort -- and commitment -- on behalf of our elected leaders, our community partners, the mortgage service providers and homeowners, to right the housing crisis," he said.

"This mortgage foreclosure conciliation legislation is one more piece to the puzzle."

As of the end of 2012, of the homeowners who have completed the conciliation conference process, 85 percent were able to reach agreement with their lenders to avoid foreclosure and remain in their homes, according to Kilmartin's office.

"This legislation will create a statewide process that will help homeowners and lenders work out agreements to allow homeowners facing difficult economic times to remain in their homes," said state Rep. Raymond Gallison, D-Bristol and Portsmouth, one of the legislation's sponsors.

"It also benefits lenders, who will now be able to have one set of rules statewide, and who will be able to keep properties occupied, thereby reducing their liabilities by avoiding having to deal with vacant properties."

State Sen. Donna M. Nesselbush, D-Pawtucket and North Providence and another sponsor of the bill, said more importantly, the measure will help more families stay in their homes.

"It ensures homeowners are provided with information regarding any programs that could help them, as well as greater access to mortgage modifications. It also requires that lenders act in a timely manner and adhere to uniform standards when executing foreclosures," she said.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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