A U.S. district court’s efforts to fight foreclosures in Rhode Island by requiring loan modification talks in pending foreclosure cases has led to mixed results, according to Deputy Special Master Barbara Hurst.
Out of 1,131 cases that entered settlement negotiations, 336 borrowers were offered loan modifications. Of those, 223 borrowers accepted and were able to stay in their homes, Hurst said in her final report to U.S. District Court Judge John J. McConnell Jr. Another 156 homeowners gave up their homes voluntarily in "cash for keys" transactions.
The process did lead to some principal reductions for homeowners, according to Hurst. In 93 cases, principal reductions totaled $12.9 million, for an average reduction of $152,901 per case.
McConnell created a master docket for foreclosure cases in Providence's federal court in August 2011. Most of the homeowners were employed and trying to hold on to to their homes, which were mostly modest dwellings that were severely underwater, according to officials.
McConnell also ordered a stay preventing foreclosures and evictions while the cases were processed. Lenders appealed the stay order and won a major battle in June 2013, when the First Circuit Court of Appeals found fault with McConnell's ruling. The appeals court said McConnell lacked the authority to issue a blanket injunction in the consolidated case accusing lenders and loan servicers of fraudulent practices, including robosigning.
In September 2013, McConnell rescinded the stay and lifted the requirement that homeowners with pending cases pay monthly "use and occupancy payments" based in part on the current market value of their homes. By then, some cases already had been dismissed because homeowners failed to make reduced monthly payments.