Lenders File Challenges To Providence Foreclosure Mediation Ordinance

In Providence, Rhode Island, The Providence Journal reports:

• Wells Fargo and Bank of New York Mellon have joined Deutsche Bank in filing a suit against the city over a recently enacted ordinance dealing with foreclosures,(1) according to Deputy City Solicitor Anthony F. Cottone. The two commercial and investment banks filed separate suits soon after Deutsche Bank filed its suit in January, he said.

• Like Deutsche Bank, both banks argue that the city’s foreclosure-mediation ordinance, proposed by Mayor David N. Cicilline and City Councilmen Kevin Jackson and Luis Aponte, violates state law, according to Cottone.

For more, see Banks sue over foreclosure ordinance.

(1) According to the story, the ordinance, which has been in effect since September, requires lenders and homeowners to attempt to meet with an independent, third-party housing counselor before completing a foreclosure. Any lender who fails to make a good faith attempt at mediation will not be able to file a deed of ownership with the city Recorder of Deeds, a step necessary to complete the foreclosure process, and are also assessed a $2,000 fine, the story states. According to an earlier story (see Council OKs fine for disregarding foreclosure law), 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 (ie. 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).

Reportedly, Deutsche Bank argues inits lawsuit that the city has no legal right to impose a different set of requirements for completing a foreclosure from other cities and towns in the state.