Rep. Ray Gallison (photo: GA)

The RI House today passed legislation sponsored by Portsmouth Rep. Ray Gallison (D-69) requiring banks and lenders to make a good-faith attempt to negotiate with homeowners before foreclosing on homes in Rhode Island, according to a release.

“It’s in everyone’s best interest to prevent foreclosure,” said Gallison. “Lenders are better off if they can continue receiving steady payments, even if they are a little lower, from the homeowner. Communities and our state obviously are hurt when houses are left empty and unattended. And of course, foreclosure is a huge loss for a family, who is then at risk for homelessness and has lost whatever investment they’ve made in their home. We need to ensure that lenders are doing their best to avoid foreclosing.”

Under the legislation (H 5335 Sub. Aaa), lenders would be required to attempt to engage a mortgager at risk of foreclosure in a conciliation conference to try to come to an agreement to modify the terms of the mortgage. If the effort is successful and an agreement is reached, the lender would not have to fulfill the requirement again if the mortgager fails to comply within the next nine months. The legislation, which would take effect 60 days after enactment, would apply only to owner-occupied residential properties of one to four housing units.

If the mortgager does not respond or cooperate with the effort to hold a conciliation conference with the lender, the lender may proceed with the foreclosure process.

Rhode Island’s unemployment rate of 9.4 percent is well above the national average, and many Rhode Islanders are struggling to avoid foreclosure. According to the Mortgage Bankers Association, Rhode Island ranked first in New England and seventh in the nation for new foreclosures in the fourth quarter of 2012, although the number of foreclosures in the state did decline by 23 percent from the previous year.

The bill now moves to the Senate, where Sen. Donna M. Nesselbush is sponsoring similar legislation.

Editorial note: Written from a press release.