Foreclosure in Rhode Island

How a Rhode Island foreclosure works, step by step

1. Generally, the legal foreclosure process can't start until you're at least 120 days behind.
2. Before starting a foreclosure, the lender must send you a written notice saying it can't foreclose without first taking part in a mediation conference. The notice must be in English, Portuguese and Spanish. If the lender doesn't mail it within 120 days after the default, it owes a penalty of $1,000 for each month or part of a month it's late.
3. The mediation conference must happen, in person or by phone, no later than 60 days after the notice is mailed. If the coordinator can't reach you after two tries, or you don't cooperate, the mediation requirement counts as met. It also counts as met if the lender made a good-faith effort and you couldn't agree on new loan terms.
4. Next, the lender must mail you a notice of the time and place of the sale by certified mail, return receipt requested, to the property address. For an individual consumer borrower, it must go out at least 30 days before the first newspaper ad.
5. The notice of sale runs in a daily newspaper at least once a week for three weeks in a row. The first ad must run at least 21 days before the sale, and the sale can take place no more than 14 days after the third ad.
6. The sale is a public auction at the property, or at another place named in the mortgage or the published notice.
7. The lender can't record its foreclosure deed until the mediation requirement is met. If the sale brings in more than is owed plus costs, the surplus goes to you, with an account of the sale.

The mediation conference comes first

Rhode Island's mediation law covers owner-occupied homes with up to four units that are the borrower's main home. The conference is free to you.

RIHousing provides the mediation services under the state law and the Department of Business Regulation's rule.

• You must cooperate with the coordinator, including giving your financial and job information and filling out the applications the coordinator asks for.
• After the conference, your lender has 14 days to answer your workout request.
• If you agree to a short sale or a deed in lieu of foreclosure, that counts as an agreement, even if it isn't completed later.

RIHousing warns that if you choose not to take part, your lender could go ahead with the foreclosure without more talks.

If you get a mediation notice, call the coordinator right away. It's the one point in this process where someone neutral sits at the table with you and the lender.

Getting caught up or working it out

RIHousing's HelpCenter is a HUD-approved counseling agency that helps any Rhode Island homeowner who is struggling with mortgage payments. Options may include loan modifications, workout agreements, repayment plans or a referral to RI Legal Services.

Its advice is not to wait: the further behind you fall, the harder it is to reinstate your loan. If you apply to your servicer for help, get your complete application in more than 37 days before a scheduled sale.

Rhode Island law also lets you redeem a mortgaged home by paying the money borrowed on it, with interest. But once the home is sold under the power of sale, that sale permanently bars you, and anyone claiming through you, from claiming it.

The newspaper ads and the auction

The lender can postpone the sale, but it must keep running the notice, with a notice of the postponement, at least once a week in the same newspaper.

The certified letter about the sale includes a notice for servicemembers. If you're on active duty or deployment, or recently finished, tell the servicer or the foreclosure attorney in writing before the sale. Once the lender gets that notice, it can't go ahead with the sale until nine months have passed, unless it gets court approval.

If you believe the lender skipped the mediation rules, you have one year from the first published notice to file a complaint in superior court to challenge the foreclosure.

How long it takes

Foreclosure generally can't legally start until you're at least 120 days behind. Once it starts, how long you have until the sale depends on your state.

For FHA loans, HUD's time frame runs from the first legal action until the lender has clear title to the home and possession of it. In Rhode Island, that's 22 months, and HUD lists publication as the first legal action.

The state's own markers: the mediation conference within 60 days after the mediation notice is mailed, the sale letter at least 30 days before the first ad, three weekly ads with the first at least 21 days before the sale, and the sale no more than 14 days after the third ad.

These are official markers, not a forecast. Your case can move faster or slower, so don't count on extra time.

Shortfall, surplus and redemption

Any surplus left after the lender takes what it's owed is paid to you, along with a true and detailed account of the sale and its costs.

In some states, the lender can sue you for the shortfall, called the deficiency, after a short sale. If your lender agrees to waive it, get that in writing and keep it.

The statute says a power of sale foreclosure is a perpetual bar against you and anyone claiming the home through you.

Ask a lawyer whether you could owe a shortfall in your case before you agree to any sale.

Rules for rescue offers and quick buyers

• Rhode Island regulates foreclosure consultants, people who offer or perform certain foreclosure services for pay. A consultant can't take any pay until every promised service is fully done, and can't take an interest in your home.
• A consultant's contract must be in writing and spell out the services and the full fee. You can cancel until midnight of the third business day after you sign.
• Separate rules cover foreclosure purchasers, people who have done more than four deals in 24 months where they buy the home during the foreclosure and let the owner stay through a lease, option, contract for deed or buyback.
• You can cancel a contract with a foreclosure purchaser until midnight of the fifth business day after you sign. and if you don't get the home back, you must receive at least 82% of its fair market value within 150 days after you leave. Breaking these rules is a deceptive trade practice under state law.
• RIHousing says you don't need to pay high fees for help. Your lender or a HUD-approved counselor helps for free.
• The CFPB warns about anyone who tries to get you to sign over title to your home, sometimes called a rent-to-buy scheme.

I don't charge you anything. The rules closest to how I buy touch taking over payments, where your deed comes to me, and a lease option, where I lease your house from you. So read every page of any offer, including mine, and don't stop talking to your lender while you weigh it.

Free help in Rhode Island

• RIHousing: homeowner assistance and mediation. Free, HUD-approved foreclosure counseling for Rhode Island homeowners, and the state's mediation program.
• Rhode Island Judiciary: Self-Help Center. Court information and links to free legal help.
• Rhode Island State Law Library. Librarians can point you to the law, but not give legal advice.
• CFPB: find a housing counselor. Search HUD-approved counseling agencies in Rhode Island.