Rhode Island's home loan industry provides traditional loan products to homebuyers. These loan products are regulated by foreclosure procedures that generally favor the borrower. As a result, individuals who are interested in purchasing a foreclosed property in Rhode Island should carefully study how Rhode Island's foreclosure procedures work to avoid potential pitfalls that exist.
Here is some background information about Rhode Island's home values, population trends and mortgage industry that can help readers understand how Rhode Island's foreclosure procedures work.
Rhode Island's February 2010 median home values tend to vary considerably around the February 2010 national median price of $190,000. To demonstrate this point, here are the February 2010 median home values for four of Rhode Island's well-known cities from lowest to highest:
There is one important reason why that this is true: Location, Location, Location!
Rhode Island's geography tends to vary considerably. It includes seaports, beachfront settings and modern suburban cities. As a result, Rhode Island’s median home values tend to vary considerably based on the desirability of the area where the home is located.
Providence (175,255): Providence is Rhode Island's state capital. It is also estimated to be the 2nd or 3rd largest city in the New England region. This city has two very different "sides" to it. On the good side, it is home to a creative class that features many well-known artists. Furthermore, many creative class residents are also employed by an educational industry that has brought many high paying jobs to the area. On the bad side, it also has had one of the ten worse poverty rates among cities with at least 100,000 residents. As a result, this city has been prone to more foreclosures than other cities in the New England region.
Warwick (85,925): With a per capita income of just $23,410, many people have difficulty purchasing a home in Warwick. As a result, many federal programs are available to help Warwick residents purchase a home.
Cranston (81,479): Cranston was named one of the "100 Best Places to Live" in 2006. Furthermore, CQ Press reports that Cranston is one of the 25 safest cities to live in. These factors have helped Cranston's home values stay relatively stable.
Cranston: Cranston is a suburb of Providence. Cranston has seen amazing growth in the past few years because it has done a good job expanding its travel and tourism industry. Cranston has also grown because many New Englanders have taken advantage of the area's lower crime rates and wonderful quality of life.
Providence: Providence has grown rapidly due to an influx of immigrants from Mexico and Latin America. Furthermore, area residents have taken advantage of an increase in jobs in the hospitality and health care industries.
Bristol (24,448): Bristol's family friendly setting has allowed the city to attract many young families into the area. Bristol has also seen a growth in jobs in the retail service and manufacturing trades. These two things have combined to make Bristol one of Rhode Island's fastest growing cities.
Rhode Island's lenders provide a traditional mix of home loan products for consumers. These home loan products include:
In Rhode Island, these home loans are recognized as either mortgages or deeds of trust. However, as a general rule, most notes for home loans are converted into mortgages unless the lender and borrower agree to terms of a deed of trust contract. In addition, most modern Rhode Island home loans have a "Power of Sale" clause that aids in any foreclosure proceeding. These "Power of Sale" clauses usually give the lender the ability to conduct a non-judicial foreclosure to repose a defaulted property.
Most home loans made in Rhode Island have recourse privileges. However, most borrowers have up to three years to redeem a property. This makes obtaining a deficiency judgment very difficult. Furthermore, it is technically possible for the borrower to bid on his own foreclosed home in Rhode Island. As a result, most deficiency lawsuits can take a long time to settle.
Rhode Island recognizes at least four procedures (source) that can be used to foreclose on a property:
As a general rule, the non-judicial foreclosure is the most common procedure that is used to foreclose on a property in Rhode Island.
Here is a brief synopsis of how Rhode Island's foreclosure procedures work:
How Rhode Island's judicial foreclosure process works:
It is used only when there is no valid power of sale clause in the mortgage or deed of trust. Whenever there is no valid power of sale clause in the loan instruments, lenders must follow these procedures to obtain a judicial foreclosure order:
How the non-judicial foreclosure procedure works in Rhode Island:
The non-judicial foreclosure procedure works in Rhode Island only if there is a legally binding power of sale clause included in the mortgage note or deed of trust document. If there is such a clause, the lender must do the following things to foreclose on a home in Rhode Island:
Borrowers may also voluntarily surrender a home. Instead of going through the heartache of a foreclosure process, many borrowers voluntarily surrender their homes to lenders. To do this, borrowers must do the following:
Finally, a lender may also foreclose by simply taking peaceful possession of the property. To do this, the lender must do these things: