Providence, RI – March 3, 2009 – (RealEstateRama) — In an effort to stem the swelling tide of house foreclosures in Rhode Island, a group of senators led by Sen. Charles J. Levesque today announced legislation to institute a 180-day moratorium on foreclosures in Rhode Island.
The move would allow time for the General Assembly to develop legislation to require judicial review of each mortgage foreclosure in the state, but more importantly, said the senators, it would allow time for homeowners who are currently at risk to work with lenders to renegotiate mortgages and perhaps save their homes.
“In many cases, this could mean the difference between keeping a home and losing it. It is in everybody’s best interest that homeowners who can afford to remain in their homes do so. That benefits not only the homeowners, but the banks as well. It benefits communities, and helps to mitigate the broader economic consequences that we are all feeling from the mortgage crisis,” said Senator Levesque, a Democrat who represents District 11 in Portsmouth and Bristol.
The legislation (2009-S 0250), which is scheduled for a hearing before the Senate Judiciary Committee today at the rise of the Senate session (around 4:30 p.m.), would apply to mortgages that have an adjustable-rate loan with an introductory period of three years or less, interest-only loans and loans with exceptional points, fees or interest in violation of the Home Loan Protection Act. It would also apply if the loan was approved on a “stated-income” basis without regard to the borrowers’ ability to repay the mortgage, if the debt-to-income ratio in excess of 50 percent under the fully indexed rate or it carries substantial penalties for prepayment or prepayment penalties that extend beyond the introductory period.
The bill would prohibit eviction proceedings for tenants during the moratorium period, unless the property is sold or the proceedings initiated prior to foreclosure.
The moratorium may also help the state leverage federal funds that could become available through federal efforts to address the foreclosure crisis.
The bill’s co-sponsors include Sen. Harold M. Metts (D-Dist. 6, Providence), Sen. Juan M. Pichardo (D-Dist. 2, Providence), Sen. Rhoda E. Perry (D-Dist. 3, Providence) and Sen. Elizabeth A. Crowley (D-Dist. 16, Central Falls, Cumberland, Pawtucket). Similar legislation (2009-H 5418) has been introduced in the House by Rep. David A. Segal (D-Dist. 2, Providence, East Providence).
“This is a crisis that is affecting everyone, whether directly through the devastation of losing a home, or through the loss of property value as the homes in your neighborhood are shuttered and sometimes looted. Tenants who have paid their bills religiously can come home one day to an eviction notice because their landlord was foreclosed upon,” said Senator Pichardo.
The nationwide foreclosure crisis has hit Rhode Island particularly hard. In 2008, Central Falls had the highest foreclosure rate of any city or town in Southern New England, and Providence was third on that list. About 10 homes are foreclosed upon every day in Rhode Island. With the second-highest unemployment rate in the nation (10.3 percent), Rhode Island and its residents are in need of programs to help residents stay in their homes, the senators said.
“My district has been hit particularly hard by the foreclosure crisis, perhaps because lenders were quick to give out questionable loans and because the economy has taken such a turn for the worse. I see every day the real and negative effects that foreclosure has on the lives of my constituents, and this moratorium would give not only some respite to homeowners on the brink, but would also better position them to work out solutions with their lenders,” said Senator Crowley, whose district includes all of Central Falls as well as parts of Cumberland and Pawtucket.
The moratorium bill creates a special commission to develop legislation to mandate judicial review of each foreclosure occurring in Rhode Island. The panel, which is to do its work during the moratorium, would consist of one designee each from the House, the Senate, the governor’s office, the secretary of state’s office and the state treasurer’s office.
“Obviously, the moratorium will provide only temporary relief for Rhode Islanders who are at risk of foreclosure. But during the moratorium, we will work on a more long-term solution that would encourage more responsible lending and better efforts to prevent and avoid foreclosure so this crisis can come to an end,” said Senator Perry.
At the news conference, the senators also praised those lenders who were already working to quell the crisis, particularly Citizens Bank, which has already instituted its own moratorium voluntarily.
“The foreclosure crisis is hurting us all, and affecting the whole
community, not just those who lose their homes or their investments, and not only those whose property values decline because of a high foreclosure rate in their neighborhoods. The social ills caused by all of the upheaval that occurs when families and individuals are forced into homelessness is a problem that affects the whole state. The state, the federal government, the mortgage industry and the lenders all have the responsibility to work together to address this issue,” said Senator Metts.
For more information, contact:
Meredyth R. Waterman, Publicist
State House Room 20
Providence, RI 02903