Foreclosing Lenders Failing To Comply With City Foreclosure Ordinance To Be Clipped $2K & Prohibited From Recording Foreclosure Deeds

In Providence, Rhode Island, The Providence Journal reports:

• The City Council has approved a $2,000 fine for banks or lenders that fail to follow the city’s new foreclosure ordinance, which requires that lenders attempt to renegotiate mortgages with homeowners before filing a deed of foreclosure with the city. The fine was among a number of amendments that received final approval from the council Thursday.

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• The first local law of its kind in the state, it encourages lenders to try to modify a mortgage so that a homeowner can remain in his or her home. A similar one has since been adopted by the City of Cranston. [...] As it is written, the “foreclosure mediation ordinance” requires a meeting between lenders and homeowners prior to foreclosure. Any lender failing to comply with the requirements would not be able to have a deed of ownership recorded by the city Recorder of Deeds, a step necessary to complete the foreclosure process.

• But the city has found that failure to comply with the ordinance can lead to breaking the chain of title, which affects the value of the property and creates problems for the purchaser.(1)

For the story, see Council OKs fine for disregarding foreclosure law.

(1) The main problem for the purchaser is that the title to foreclosed property will be muddled up, which will affect its value, and the ability to obtain financing and title insurance for future buyers. An example of muddling up the title to homes going through the foreclosure process is the mess currently going on in Massachusetts involving the apparently faulty titles to homes that have been foreclosed over the last several years throughout the entire state due to the screw-ups of the foreclosing lenders and their attorneys in the foreclosure process. See:

• Massachusetts Court Ruling Gums Up Resales Of Foreclosed Homes Across State; Title Insurance Unavailable For Clouded Ownership Due To Faulty Paperwork;
• Lenders' Problem "Entirely Of Their Own Making" Says Judge In Affirming Earlier Ruling That Puts Title To Foreclosed Massachusetts Homes Into Question,
• Thousands Of Foreclosures Are Void, Says Massachusetts Class Action Demanding Lenders & Their Lawyers Prove Note Ownership.

In addition, in the following excerpt from a June 24, 2009 story in the South Florida Daily Business Review (see Judge grapples with her discovery of 15,000 unserved foreclosure cases), Miami-Dade Judge Jennifer D. Bailey similarly alluded to possible future title problems to homes going through the foreclosure process when the screw-ups relate to the failure to properly serve the homeowners with the foreclosure lawsuit (ie. the summons and complaint) when the foreclosing entity initiates the legal action:

• “It all starts with service. If people don’t get served, all we’re doing is buying ourselves a bunch of title cases in six years,” the judge said [my emphasis added; not in the original].