Buyers of foreclosed properties and homeowners who are facing foreclosure should be aware of foreclosure redemption rights in Rhode Island. Since Rhode Island is a non-judicial (e.g., no court proceedings) foreclosure state, there are only certain circumstances that allow a homeowner to exercise their rights of redemption.
What are redemption rights?
Rights of redemption are rights provided to a homeowner who has gone through the foreclosure process. These rights are typically laid out in state statutes and allow the borrower to pay the full balance of the outstanding loan plus certain costs to the lender within a specified period of time. Borrowers who are able to exercise these rights are able to reclaim their home, even if it has been sold at a foreclosure auction.
What does Rhode Island allow?
Foreclosure cases in Rhode Island that are handled through a non-judicial process do not have any redemption rights. This means that the borrower cannot exercise any rights once the property has been sold to another buyer. Generally, most foreclosures are complete within 60 to 80 days.
When can a Rhode Island homeowner exercise their rights?
Foreclosures contested by the homeowner become judicial foreclosures. In these cases, the court becomes involved and gives the go-ahead to the lender to proceed with the foreclosure. For buyers of foreclosed properties however, this process is fraught with danger. Homeowners who have lost their home through the judicial foreclosure process may exercise their rights of redemption for up to three years. For the buyer of a foreclosed property, this means they could theoretically own the property for up to three years and the original homeowner may reclaim the property.
Why would a borrower contest a foreclosure?
Borrowers may contest foreclosures for any number of reasons. Some of the primary reasons for contesting a foreclosure include (a) the borrower feels they will be able to get back on track with their mortgage (they may file bankruptcy in this case) or, (b) they may feel that because of the robo-signing scandal the lender may not be able to prove they are the rightful mortgage holder.
Rhode Island Statutes Title 34 govern all foreclosures in the state. These statutes clearly explain the rights of the borrower and the responsibilities of both borrower and lender. Homeowners should also be aware that in the event that their home is foreclosed that Rhode Island law provides that the lender may file a deficiency judgment. This means that even if the home is foreclosed, the borrower may still be on the hook for additional funds in the event the foreclosure sale does not cover the full amount of their unpaid mortgage.
Homeowner’s need to be able to protect themselves from fraudulent foreclosures, especially if there is a doubt as to the validity of the original mortgage or the rights of the lender to foreclose. While most Rhode Island foreclosures do not result in the homeowner having redemption rights, some do. For those homeowners who have foreclosure redemption rights in Rhode Island an attorney should be contacted for assistance. When purchasing a home at a foreclosure auction, it is a good idea to find out if the home was obtained through the judicial or non-judicial foreclosure process to avoid potentially losing the home if the original owner has redemption rights.