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Rhode Island Rules Aimed at Staving Off REO Homes



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By : John Cutts    99 or more times read
The city council of Cranston in Rhode Island is considering rules aimed at containing the number of REO homes in the area. Under the rules, lenders are required to renegotiate the loans of distressed borrowers before foreclosures could be initiated.

The strategy is similar to the one initiated in the neighboring city of Providence in which lenders are required to try and work out terms of troubled loans before they foreclosed on distressed properties.

Two foreclosure ordinances are being considered by the city council of Cranston. One rule requires a third-party negotiation before a lender repossess an owner-occupied home. The second rule would require lenders to send a written notice before they evict renters of foreclosure properties.

The measures were proposed by Councilman Mario Aceto who explained that his goal is to help distressed homeowners remain in their properties. He added that he wants to make sure that all homeowners who are being foreclosed on in the city have gone through the proper foreclosure process.

As of August 31, the city of Cranston posted 164 foreclosures in 2009. So far, the city is ranked fourth in terms of high foreclosure rates in the state, with Providence, Pawtucket and Warwick leading the list. In 2008, the city of Cranston had 361 REO homes.

Industry experts said that, just like the rest of the country, the first spate of foreclosures in Cranston was due to the collapse of subprime lending. And this time, the foreclosure problem is being kept alive by the rising unemployment rate. The unemployment problem is complicating matters because many creditworthy homeowners are losing their homes not because they are irresponsible borrowers but because of mitigating circumstances.

Cranston officials cited market predictions about the increase in default rates in the coming months. They explained that the ordinance covers owner-occupied houses and would require lenders and troubled homeowners to participate in a loan conciliation meeting to be mediated by counseling agencies approved by the U.S. Department of Housing and Urban Development.

The goal of the mediation is to work out loan terms to make them affordable, thereby giving homeowners a chance to remain in their properties. If no agreement could be reached, lenders are allowed to repossess the troubled properties and place them on their inventory as REO homes.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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