Navigating the Rhode Island Foreclosure Mediation Act: What Homeowners Need to Know

Losing a home in Pawtucket, Providence, or Cranston is a terrifying prospect, but Rhode Island offers a powerful tool to help families stay in their properties. The Rhode Island Foreclosure Mediation Act (R.I. Gen. Laws § 34-27-9) requires mortgage lenders and servicers to offer mediation to eligible homeowners before initiating a non-judicial foreclosure. This process is designed to force banks to sit down at the table and explore alternatives to foreclosure, such as loan modifications, repayment plans, or short sales.

Navigating this process requires strict adherence to deadlines and the submission of detailed financial documents. Because lenders will have their own legal teams present, it is highly recommended to hire an attorney from our US Lawyers Directory to advocate for your best interests during the mediation session.

Step-by-Step Process of the Mediation Act

The mediation program is overseen by a state-designated mediation coordinator, often working alongside organizations like the Rhode Island Housing and Mortgage Finance Corporation, Providence.

Step 1: Eligibility Criteria for Primary Residences

Not every property qualifies for mandatory mediation. To be eligible under Rhode Island law, the property must be a 1-to-4 family residential dwelling, and it must be your primary residence. Investment properties, vacation homes, and commercial buildings do not qualify for this statutory protection.

Step 2: Receiving the Notice and Scheduling the Conference

Before a lender can publish a Notice of Sale, mediation is a mandatory prerequisite under state law. The mortgagee must mail a formal Notice of Mediation Conference using Form 34-27-9, Rhode Island, Department of Business Regulation, Notice of Mediation Conference to the homeowner within 120 days of loan default. Rather than a voluntary opt-in, the mediation conference is formally scheduled by the mediation coordinator and must occur within 60 days following the mailing of the notice. The coordinator will only issue a Certificate Authorizing Foreclosure if the homeowner fails to respond after at least two attempts to schedule the session or explicitly refuses to participate.

Step 3: Preparing Hardship Letters and Financial Packets

Once scheduled, you must provide a comprehensive financial package to the mediation coordinator and your lender. This typically includes a hardship letter explaining why you fell behind (e.g., job loss, medical emergency), recent pay stubs, tax returns, and bank statements. You may be required to fill out a standardized form, such as Form 710, FED, Fannie Mae, Mortgage Assistance Application, depending on who owns your loan. A lawyer can ensure your packet is complete, as missing documents are the most common reason lenders deny loan modifications.

Step 4: Attending the Mediation Session

During the session, an impartial mediator will facilitate a discussion between you, your attorney, and the lender's representative. The goal is to reach a mutually agreeable resolution. If an agreement is reached, the foreclosure is halted, and you begin your new payment plan.

What to Do if the Servicer Acts in Bad Faith

Rhode Island law mandates that the lender must participate in the mediation process in good faith. Unfortunately, some servicers attempt to bend the rules.

Dealing with Unauthorized Representatives

The law requires the lender to send a representative to the mediation who actually has the authority to approve a loan modification. Often, banks send low-level employees or third-party attorneys who simply say, "I have to check with the underwriter." If the servicer sends an unauthorized representative or refuses to review your complete financial packet, your attorney can report them to the mediation coordinator. The coordinator can declare that the lender failed to mediate in good faith, which legally blocks them from foreclosing until they comply.

How Much Does it Cost?

There is no direct fee charged to the homeowner to participate in the state's mediation program. The lender is responsible for paying the mediator's fee. However, hiring a private attorney to represent you during the document preparation and the mediation session itself generally costs between $1,500 and $3,500, depending on the complexity of your financial situation.

How Long Does the Process Take?

From the time you receive the mediation notice to the actual mediation session, the process usually takes 60 to 90 days. During this entire period, the foreclosure process is legally paused. If a trial payment plan is agreed upon, you will make payments for 3 to 4 months before the loan modification becomes permanent.

Frequently Asked Questions (FAQ)