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.
Providence is the sole metropolitan area of the state.
|US Rank||Metropolitan Area||2016 Pop||2010 Pop||Change||% △|
|38||Providence-Warwick, RI-MA Metro Area||1,614,750||1,600,852||13,898||0.87%|
Rhode Island's February 2010 median home values tend to vary considerably around the national median price of $190,000. To demonstrate this point, here are the 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 (178,042): 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 (82,672): 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 (80,387): 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.
Coventry (35,014): town in Kent County located in the westcentral part of the state.
Cumberland (33,506): Town in the northeeasternmost edge of the state.
South Kingston (30,639): The largest town in the state by geographic area, which includes the villages of Kingston, West Kingston, Wakefield, Peace Dale, Usquepaug, Snug Harbor, Tuckertown, East Matunuck, Matunuck, Green Hill, and Perryville
Bristol (22,954): 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.
According to the United States Census an estimated 1,056,426 people live in the state of Rhode Island. The state has 1,033.81 mi² of land area, which gave it a population density of 1,021.88 per mi². Here is a list of cities, towns & Census Designated Places across the state, with their estimated population as of June 2016 & the 2010 United States Census. For Census Designated Places (CDP) where there was no population estimate available for 2016, the 2011-2015 American Community Survey 5-Year Estimates data was used.
All table columns are sortable. Click on the column headers to sort by that column. Click again to sort low to high. Cities with higher levels of population growth typically see the increased demand drive faster real estate price appreciation.
|Rank||Geography||County||2016 Pop||2010 Pop||Change||% △||Land mi²||Pop Den mi²|
|Valley Falls CDP||Providence||12,088||11,547||541||4.69%||3.5||3,453.71|
|Newport East CDP||Newport||11,091||11,769||-678||-5.76%||5.74||1,932.23|
|Cumberland Hill CDP||Providence||8,439||7,934||505||6.37%||3.2||2,637.19|
|Narragansett Pier CDP||Washington||3,957||3,409||548||16.08%||3.57||1,108.40|
|Hope Valley CDP||Washington||1,733||1,612||121||7.51%||3.3||525.15|
|Foster Center CDP||Providence||325||355||-30||-8.45%||2.17||149.77|
|Watch Hill CDP||Washington||184||154||30||19.48%||0.8||230.00|
Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2016
Source: U.S. Census Bureau, Population Division
Release Date: May 2017.
As of 2017 the conforming loan limit across the United States is set to $424,100, with a ceiling of 150% that amount in areas where median home values are higher. Local affordability makes the $424,100 ceiling apply across most the state for single unit homes. Dual unit homes have a limit of $543,000, triple unit homes have a limit of $656,350 & quadruple unit homes have a limit of $815,650. People buying properties in the Providence-Warick metro areas have higher conforming mortgage thresholds.
|County||Metropolitan Designation||1 Unit Limit||2 Unit Limit||3 Unit Limit||4 Unit Limit|
Home buyers who are borrowing more than the above amounts will likely need to obtain a jumbo mortgage. Jumbo loans typically have a slightly higher rate of interest than conforming mortgages, though spreads vary based on credit market conditions.
Rhode Island's lenders provide a traditional mix of home loan products for consumers. These home loan products include:
USDA loans can help people with low incomes in rural parts of the state qualify for a subsidized low-interest loan.
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.
The state of Rhode Island has a very low risk of wildfires, tornadoes & earthquakes. Bristol, Providence & Washington counties have a low risk of hail, while other counties have a very low risk of hail.
Homeowner's insurance policies typically do not cover flooding. Here are counties across the state which have a risk profile above very low for either flooding or hurricane storm surges.
Home buyers with mortgages in high-risk areas are required to buy flood insurance. Most flood insurance policies are sold by the United States federal government through The National Flood Insurance Program. Under-priced flood insurance in high-risk areas act as a subsidy to wealthy homeowners.
The NFIP does not charge nearly enough to cover the expected costs of its liabilities. The assessments are not sufficient to build any buffer to cover an extraordinary year, such as what occurred with Hurricane Katrina in 2005 or Hurricane Sandy in 2012. Because homeowners dont incur the full cost of building in a flood zone we end up with more houses there than if homeowners incurred the full cost of the flood risk, which exacerbates the governments costs in the next disaster.
Typically, homes built after 2002, when building code regulations tightened, are subject to lower insurance rates than older homes. On the other hand, homes without hurricane straps, with roofs that do not meet current standards for wind, with older plumbing or with outdated electrical systems may be difficult or very expensive to insure.
Homeowners who live in lower risk areas & are not required to purchase flood insurance heavily cross-subsidize homeowners who are in areas where floods are more common.
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: