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Living in the Ocean State.

Home Mortgage Rates in Rhode Island

Castle Hill Lighthouse.

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 Real Estate

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:

  1. Providence ($169,900).
  2. Pawtucket ($179,900).
  3. Cranston ($220,000).
  4. Newport ($399,900).

There is one important reason why that this is true: Location, Location, Location!

Claiborne Pell Newport Bridge.

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.

Largest Cities

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.

Providence Skyline.

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.

Fastest Growing Cities:

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.

Rhode Island Mortgage Types

Rhode Island's lenders provide a traditional mix of home loan products for consumers. These home loan products include:

  1. ARM's that vary in maturity from one year to five years.
  2. Fixed rate mortgages that vary in maturity from 10, 15, 25, 30 and years.
  3. FHA 30 year fixed rate mortgages.
  4. VA 30 year fixed rate mortgages.
  5. Refinance loans,
  6. Second mortgages, and
  7. Reverse mortgages.

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.

Providence at Night.

Rhode Island's Foreclosure Processes

Rhode Island recognizes at least four procedures (source) that can be used to foreclose on a property:

  1. A judicial foreclosure procedure
  2. A non-judicial foreclosure procedure
  3. Voluntary surrender by the borrower to the lender
  4. Or peaceably entering and obtaining possession of the house.

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:

  1. First, the lender must go to the county courthouse where the home resides to sue for the right to foreclose on the borrower.
  2. If the court agrees that the borrower is in default, the lender must send a letter to the borrower that "warns" the borrower he is in danger of defaulting on his loan.
  3. The borrower may contest the letter in court. There is no known time frame that sets forth how long the borrower has to contest this letter. This can create headaches for lenders who use this process.
  4. Once the borrower does contest the letter, the court may give the borrower up to three years to redeem the property. Rhode Island law gives borrowers up to three years to redeem a foreclosed property. To do this, the borrower must pay off the entire amount due on the note plus any interest that has accrued while in foreclosure. This person may be the borrower, an heir or a representative appointed by the borrower to manage the proceedings. As a result of these guidelines, most lenders these days will insist on inserting a power of a sale clause on any mortgage note or deed of trust issued in Rhode Island.
  5. Once the redemption period has expired, the lender may proceed with selling the house at auction.
  6. The sale of the house is governed by these guidelines:
    • The lender must first publish a notice of the sale in a local county newspaper where the home resides at least once a week for three continuous weeks before the sale.
    • The first appearance of the notice must be published at least 21 days before the proposed date of the sale.
    • The lender must mail a valid copy of the notice to the borrower at least 20 days before the first publication date.
    • This notice must contain the following information:
      1. The names of the borrower and lender,
      2. The original mortgage date, the amount due to the lender,
      3. A legally valid description of the property
      4. The time and place of the sale.
    • The time and place of the sale are not governed by Rhode Island's laws. This makes it possible to have the sale at any place and time that is convenient for the lender.
    • The home is sold for cash (or cash equivalent) to the highest bidder.
    • There are no minimum bid requirements.
      This means a bidder may bid $1.00 on the home if he so chooses.
    • There is also no minimum floor for a winning bid.
      This means a home could technically sell for $1.00 to the first person who bids a dollar. This puts borrowers in a very compromising position because they are on the hook for a deficiency judgment for any difference between the winning bid and the original loan amount.
    • Furthermore, anyone may also bid at the auction. This means that the lender and even the borrower could technically bid on the house.
    • Finally, once the home has been sold, the winner must wait up 60 days for a deficiency judgment before taking final possession of the home.

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:

  1. First, the lender must go to the county court where the home resides to verify that a legally binding power of sale clause was included in the mortgage note or deed of trust document.
  2. If the court agrees that such a clause exists, the lender must first see if there is sale procedure included in the power of sale clause. (Source: http://www.foreclosurelaw.org/Rhode_Island_Foreclosure_Law.htm.)
  3. If there is a sale procedure in the power of sale clause, that procedure will govern the sale of the house.
  4. If there is no such sale procedure, the lender must use the same procedure outlined above that is used to invoke a judicial foreclosure procedure.

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:

  1. They must write and sign an affidavit that tells the lender that they are voluntarily surrendering the home to the lender using their own free will.
  2. This affidavit must be notarized by a notary republic.
  3. Once this is done, the notarized notice is sent to the lender.
  4. Once the notice is in the lender's hands, the title to the home is surrendered to the lender.
  5. Once this is done, the borrower must leave the property. The borrower has no redemption rights if he chooses to surrender the property to the lender.

Finally, a lender may also foreclose by simply taking peaceful possession of the property. To do this, the lender must do these things:

  1. Take possession of the property peacefully.
  2. Bring two witnesses along who will attest that the lender is the legal owner of the home.
  3. Ask that the witnesses sign a Certificate of Possession that attests that the lender is the legal owner of the home
  4. Have the Certificate of Possession notarized by a notary republic
  5. Retain physical possession of the home for at least one year. Once these things are done, the home is legally in the lender's possession. The borrower has no redemption rights if the lender chooses to foreclose a home this way.