Among the legislation that Andrew Morse has perused for his regular highlights of legislation coming up for committee review in the General Assembly is a bill submitted by Warwick Democrat Senator Erin Lynch (S2658) that would ease the scrutiny of documents related to any “deed, mortgage, lease, power of attorney, release, assignment or other instrument made for the purpose of conveying, leasing, mortgaging or affecting any interest in real property in this state.”  According to Attorney General Peter Kilmartin’s public information officer, Amy Kempe, the AG has not reviewed the legislation and therefore has no comment on it, but it seems reasonable at least to wonder whether the legislation legalizes some of the practices that prompted the massive “national mortgage settlement.”  That settlement not only brought $172 million to Rhode Island, but for all intents and purposes, it tightened regulations on mortgage practices.

The Current has sought clarification from Sen. Lynch and will explore the matter further.  However, if the legislation is, as it appears to be, to the benefit of banks and other lenders, it may help to explain why advocates for such parties weren’t interested in commenting, for the Current, on either the settlement or legislation that would allow homeowners facing foreclosure to remain on their properties (H7136 and S2212).  The sentiment behind those bills is undeniably admirable and appears to suggest a common sense solution to a mutual problem:  banks need properties maintained to livable degree, communities suffer in value and safety when multiple houses lie vacant, and those losing their homes because of foreclosure need a place to live and time to transition.

It’s exactly those moments of broad agreement, however, when opposing views are arguably most valuable.  In general terms, for example, a case could be made that the unique circumstance of having a former owner remain a tenant on a property slated for proximate sale justify special precautions, perhaps even penalties for such behaviors as constitute “just cause” for eviction.  The difficulties of dealing with renters are beyond the scope of financial institutions’ competence, and adding costs to holding a property will drive down the prices for which they’ll be willing to sell, which will affect comparative pricing for neighbors who seek to sell their own homes.

Opposition would also serve to tighten up the bill.  For example, mortgage holders would have 30 days to notify a building’s residents with the identities and contact information of the “foreclosing owner” and property manager, as well as to notify them about the amount of rent due.  They’ll then have to wait another 30 days before it’s possible to evict the residents even with “just cause” for a variety of reasons, including (for one) situations in which “the premises has been cited by a state or local minimum housing code enforcement agency for substantial violations affecting the health and safety of tenants.”  To a layman’s reading, that appears to create the possibility that a negligent homeowner whose house was in dangerous disrepair could enter into foreclosure and then sue the bank for injuries resulting from the deficiencies.

How likely (and how expensive) such outcomes are likely to be is best explored through the back-and-forth of advocates on either side of the question.  Whatever the case, the local community has reason to fear that the costs will be borne more broadly than just by special interests.