By Randal Edgar, The Providence Journal, R.I.
Nov. 1--PROVIDENCE -- The run of foreclosures that has taken nearly 6,000 homes and rental properties away from struggling borrowers since January 2008 may soon be running a little more slowly.
A rare October session of the General Assembly last week saw lawmakers pass a bill that requires lenders to take two additional steps before starting foreclosure proceedings.
The bill, if not vetoed by Governor Carcieri, will require lenders to give borrowers a 45-day notice before starting foreclosure proceedings, and lenders will also have to tell borrowers that they can seek free mortgage counseling.
Housing advocates say the bill will add to the time it takes for lenders to foreclose on properties, giving borrowers more time to try and work out a solution.
"It's another tool in the tool belt, in the process to try to keep people in their homes," said Brenda Clement, executive director of the Housing Action Coalition of Rhode Island. "Anything that tries to get them alerted to 'you've got a problem' is a good thing."
But even as the bill drew applause from advocates who had waited more than a year for lawmakers to act, others said the bill is just as notable for what it does not do.
Unlike other bills that floated through the State House last week, the bill that passed does not require lenders to offer face-to-face mediation to struggling borrowers, nor does it require lenders to provide written notice to tenants of pending foreclosure proceedings. It also does not specify that foreclosure rules are governed by state law and not by local ordinances, such as those recently adopted in Providence and Cranston.
Jim Hahn, legislative counsel for the Rhode Island Mortgage Bankers Association, said a team of bankers and tenants-rights groups favored a different bill that provided more protections and also specified that the foreclosure issue must be addressed by state law.
He was mystified as to why it did not pass.
"The real risk here is that if you end up with a crazy quilt of different ordinances in each municipality, you run the risk of lenders saying, you know what, it's too complicated," he said. "The end result will be to increase the cost of borrowing in Rhode Island."
According to the Boston-based Warren Group, which tracks real-estate data, the state saw 3,479 foreclosures during 2008 and had seen 2,443 this year, as of Sept. 30. Most of them have occurred in a core group of urban and urban-ring communities that includes Providence, Pawtucket, Central Falls, Cranston, Woonsocket, Warwick North Providence, West Warwick and Johnston, said Aglaia Pikounis, the Warren Group's spokeswoman.
Providence and Cranston responded recently with local ordinances that require lenders to offer mediation that aims to adjust the loan terms and allow people to stay in their homes.
Hahn said the local ordinances could face legal challenges because they deal with issues already addressed in state law. As of last week, however, the Providence ordinance seemed to be working. Jo-Ann Ryan, spokeswoman for Rhode Island Housing -- one of the HUD-approved agencies that lenders can call to set up conferences with homeowners -- said her agency had mediated in nine cases, with seven resulting in new terms that allowed families to stay in their homes.
Sen. Juan M. Pichardo, D-Providence, said he sponsored a bill went further than the one that passed but ran into opposition from Providence and "other cities" because his bill specified that foreclosures must be addressed at the state level.
He said he plans to try again when the General Assembly reconvenes in January.
"It's a very critical issue and we need to address it quickly," he said. "People will continue to lose their homes, and we can't afford that. It disrupts our families, it disrupts our economy and it disrupts our neighborhoods."
It was unclear as of Friday whether Governor Carcieri will support or veto the bill that passed. Amy Kempe, Carcieri's spokeswoman, said the governor had not yet seen it.
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