Specific states, including Rhode Island, offer mediation to homeowners who are behind in mortgage payments and facing a foreclosure. In mediation, the borrower, the foreclosing party (the "lender"), and an impartial mediator get together and try to work out a way to avoid foreclosure.
While Rhode Island's law requiring lenders to participate in mediation was set to expire in July 2018, the state legislature extended the program for several years.
Read on to learn the basics about Rhode Island foreclosures, how Rhode Island’s foreclosure mediation process works, and when the mediation program will end.
Before the mediation law went into effect in 2013, Rhode Island had one of the least restrictive foreclosure processes in the country. Most foreclosures in the state are nonjudicial, which means the lender does not have to go through state court to foreclose. Instead, the lender simply has to give a preforeclosure notice and a notice of sale to the borrower, and publish the notice in a newspaper. (To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)
Now, as part of the Rhode Island process, lenders must also give borrowers the opportunity to meet at a mediation conference to explore alternatives to foreclosure.
Foreclosure mediation is a process that can help a homeowner avoid going through a foreclosure. Mediation consists of a meeting between the borrower, the lender (though usually the servicer attends the mediation on behalf of the lender), and the mediation coordinator, who is an impartial third-party that facilitates the meeting.
At the meeting, the parties discuss the borrower's finances and try to work out a way for the borrowere to keep the home or give up the property without going through a foreclosure. Potential outcomes of mediation include:
Since May 16, 2013, Rhode Island law has required lenders to give borrowers the opportunity to participate in a foreclosure mediation conference.
To qualify for a mediation conference, the mortgage must be a first-lien mortgage and the property must be:
Before starting a foreclosure, the lender has to send the borrower a notice about the right to participate in a foreclosure mediation conference.
The mediation conference takes place in person or over the phone no later than 60 days after the lender mails the notice. The lender covers the cost of the mediation conference. The borrower doesn't have to pay anything to participate.
What happens if you can’t work out a way to avoid foreclosure. If the parties can’t agree on a way to avoid foreclosure at the mediation conference, the lender may proceed with the foreclosure. (Rhode Island law requires the lender, or the servicer on its behalf, to negotiate in good faith during the process.)
What happens if you work out a way to avoid foreclosure. If the borrower and lender agree on a loan workout as a result of the mediation conference, but the borrower defaults on his or her obligations under the agreement within 12 months, the lender doesn’t have to participate in another mediation conference. Instead, the lender can go forward with the foreclosure.
Previously, Rhode Island's mediation program was set to expire on July 1, 2018, but the legislature extended the sunset (end) date. Now, the statewide mediation program is set to end on July 1, 2023.
You don’t have to hire a lawyer to represent you in at a foreclosure mediation conference, but it’s often a good idea. A lawyer can help you work your way through the mediation process and protect your legal rights. If you want to fight the foreclosure in court, you should consider talking to an attorney to learn about your options. You might also consider consulting with a HUD-approved housing counselor to learn more about the different ways to avoid a foreclosure.
Also, if you're a Rhode Island homeowner facing a potential foreclosure and want to save your home, you might qualify for financial assistance from the state's Hardest Hit Fund program.
If you’ve already gone through a foreclosure, but think the lender didn’t comply with Rhode Island’s mediation law or didn’t negotiate in good faith, you should talk to an attorney as soon as possible because you have a limited amount of time—one year after the first notice of foreclosure was published—to file and serve a lawsuit disputing the foreclosure, as well as to record a lis pendens in the land records.