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Rhode Island’s Foreclosure Crisis Far From Over

Tuesday, July 23, 2013


Pulitzer Prize-winning reporter Dean Starkman

And you thought the mortgage crisis was over, Rhode Island? Um, no.

The latest numbers, obtained by GoLocalProv from Rhode Island Housing, the state housing agency, show new foreclosures actually ticking up slightly in the first three months of 2013, the latest data available, adding to the pipeline of foreclosure to come.

Meanwhile, the number of mortgage delinquencies—the prelude to foreclosure—is projected to rise for the rest of the year before finally dropping off. A real recovery? That’s two years away. Normalcy in the housing sector? Come back in 2018.

“The battle has just begun,” says George Babcock, a leading foreclosure attorney based in Pawtucket. “What happens here only a daily basis...the mortgage nightmare is incomprehensible to me.”

Uptick in latest foreclosure figures

While overall mortgage delinquencies and foreclosures in the state are off their disastrous peaks from a couple of years again and slowly heading down, measures of housing misery remain at stunningly high levels historically and continue to outpace both the New England and national averages. According to the latest Rhode Island Housing data, total loans in foreclosure hit 3.89 percent of all mortgages in the state, up slightly from the previous quarter and down slightly from the same quarter a year ago. At 7.71 percent, the state’s total delinquencies were down slightly from the previous quarter and up slightly for the year. Rhode Island continued to lead New England with the worst delinquency rate and is the 12th worst in the nation. A staff-generated projection of state delinquencies rates shows them rising to over 8.5 percent by the end of the year before dropping below current levels in the first quarter of 2014.

Those who thought the state's housing crisis was blowing over are in for a wake-up call with foreclosures on the rise.

None of this comes as a big surprise to Danette Briggs. The 42-year-old single mother of five found herself under the foreclosure gun not long ago as behemoth Bank of America was bidding to take her house on Adelaide Avenue, in Providence’s Elmwood neighborhood.

“God has put me through a lot with this house,” she says.

Duped into a disastrous loan

She never wanted the massive (to her) $244,000 mortgage in the first place—not after she saw around the time of the closing that the monthly payments would come to more than $1,800 a month, a huge portion of the salary she draws working in the state Department of Motor Vehicles. But, she says, a loan officer warned her that the sellers would “‘sue you if you back out of this.’” Briggs learned only later that there was no legal basis for such a threat.

The payments stretched her income to the point that she had wait to pay until after the second of her semi-monthly checks arrived, forcing her to factor in a $76 late fee every month. When the water tank broke and the sewer backed up, there was no margin for error. Within a few months of buying the home in 2006 she fell behind.

Rhode Island, national delinquencies remain high

The continuing foreclosure flood has Rhode Island’s housing agencies and legal and community groups scrambling. Next Monday (July 29th), Rhode Island Housing’s Help Center and state Rep. Teresa Tanzi, (D-Narragansett, Wakefield) are holding a free workshop for families at risk of foreclosure. Among other things, the workshop will help families determine if they’re eligible for the federal aid under the Making Home Affordable Program. The event is open to the public and will take place at 6 p.m. at the Peace Dale Library, 1057 Kingstown Rd., Wakefield. Meanwhile, the Rhode Island Bar Association and Rhode Island Legal Services is offering free legal help to state homeowners and tenants facing mortgage foreclosure issues. Those needing advice can contact the Rhode Island Bar Association's Public Service Department at (401) 421-7799 or sfontaine@ribar.com.

To be sure, the trends overall in foreclosures all point down from the historic levels reached after the financial crisis that followed the fall of Wall Street giant Lehman Brothers in September 2008. For decades, loans in foreclosure in Rhode Island (and elsewhere) typically ran to a fraction of a single percentage point, with changes measured in a few hundredths of a percentage point, known as “basis points.” At the peak of post-crisis fallout, early 2011, loans in foreclosure amounted to fully 4.5 percent of all loans in the state, while delinquencies—loans with payments 60 days past due, peaked at nearly 9.5 percent, according to Rhode Island Housing figures.

To see RI Housing graphs describing Rhode Island's foreclosures, go here. 

Big human toll

But, the reality is that fluctuations of delinquencies and foreclosure data from month-to-month or even year-to-year mask a larger picture of a single, slow-motion train wreck in the housing sector that has already upended thousands of lives, set back low-income communities, hollowed out whole neighborhoods, and, worst of all, still has years to play out. The impact just on the state and its economic prospects, for instance, are profound and still not yet fully understood. A survey a couple of years ago showed that Rhode Island families had already suffered $5.6 billion in lost wealth in just the first two years of the crisis.

And while most of the new foreclosures were started, as would be expected, in Providence and the rest of the state’s urban core, even the more affluent suburbs have not been immune. Cranston and Warwick, for instance, contribute more than 21 percent of the 967 newest foreclosures among what the state calls its 12 Hardest High Fund communities, those eligible for state and federal housing assistance, according to Rhode Island Housing figures.

In an interview, Richard Godfrey, executive director of Rhode Island Housing, the main government-sponsored housing agency for the state, says steady improvements in the slow-motion foreclosure crisis shouldn’t be expected before the second half of 2015—that is to say, two full years from now, while a degree of normalcy, with foreclosure rates back to typical historic levels, is still about five years away.

“There’s the human impact, there’s the community impact, and then there’s the financial impact” to the state’s economy, Godfrey says. “The biggest concern, of course, is what happens to these families.” The degree of emotional distress among borrowers reached the point that agency called in Samaritans of Rhode Island to give housing staffers suicide-prevention training.

In a sense, any numbers outlining the overall mortgage market understate the extent to which the mortgage crisis blew through low and lower-middle-income groups and neighborhoods, which were flooded with so-called subprime mortgages. Nationally, subprime loans—products with teaser rates, prepayment penalties, insurance fees, and other onerous features—saw foreclosure rates for adjustable subprime loans hit more than 20 percent, a staggering figure.

The problem of "underwater" mortgages

Christopher Rotondo, an organizer for DARE to Win, the community-advocacy group based in South Providence, says the crisis, rather than ending, appears to be entering a new phase. The first wave of foreclosures were largely the result of the defective and even predatory mortgage products zealously sold by mortgage lenders during the height of the housing bubble, 2004-2006, when nearly $2 trillion subprime loans were sold nationwide. Now, he says, those going through foreclosures are more likely to be people dealing with a follow-on affect of the crisis: the crash in home prices that left the value of their homes lower than the amount of their mortgage. The continued weakness in the state’s economy—with unemployment still over 9 percent—will further pressure this group.

A study, released in May by the Alliance for a Just Society, a coalition of community organizing groups, found that as of the end of last year, 11,000 Rhode Island homes were worth less than their mortgage—another category in which the state ranks last in New England on a per capita basis. Such so-called “underwater” mortgages are much more likely to go into foreclosure, as the families paying don’t have the option of selling the home to avoid having it seized by the bank.

Briggs is determined not to let that happen. She has already been through four attempts at loan modification, including one that turned out to be a loan scam that cost her $900, before one was successful in cutting her loan payments by slightly more than half, while stretching her mortgage out to 40 years. Still, she ‘s deeply underwater—the owner a property that a city estimate puts at about half the loan amount—and she’s working to get her principal reduced.

“I didn’t realize it was going to be this difficult,” she says. “It’s been a struggle. God has carried me all these years with this house, and I’m not going to lose it. I’m fighter.”


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Well this just can't be. The mainstream media has been screaming about how wonderful the real estate market is doing and how our president has done such a wonderful job.

Are you suggesting that someone my not be telling the truth????

Comment #1 by pearl fanch on 2013 07 23

Meanwhile Mayor Taveras and the city council raised property taxes again!!!! How does that help????

Vote for me in ward 14 for city council, I will never vote to increase your taxes!

Comment #2 by anthony sionni on 2013 07 23

Anthony, not voting to increase taxes just isn’t good enough. Why not cut property taxes 10% and at the same time balance the budget by cutting spending 15% department by department?

We’ve all had to tighten our belts in these last few years—and a whole lot more than 15%!

Also cutting taxes 10% would signal to businesses and residences that the bleeding has stopped and Providence is on the mend. New businesses would move into the City, and the few existing ones might stay.

Comment #3 by James Berling on 2013 07 23

Guess what else competes with that portion of pay devoted to owning a home in Rhode Island? Property taxes!!!...which are about to explode regardless of the valuation of your home. The continuing weakness in job and wage growth here will combine with local and state governments unwillingness to cut spending and destroy towns across Rhode island just as has happened in Detroit. The only way out for individuals is to sell your home or walk away from the mortgage and tax commitments. After all that's what your elected officials are about to do.

Comment #4 by michael riley on 2013 07 23

We can put light where there's darkness, and hope where there's despondency in this country. And part of it is working together as a nation to encourage folks to OWN THEIR OWN HOME"
- President George W. Bush, Oct. 15, 2002

Bush foolishly pushed hard to expand home ownership, especially among minority groups, who could least afford it. Bush took a lot of pride that home ownership had reached historic highs. . But his housing policies and lack of regulations encouraged lax lending standards, and brought on the foreclosure crisis that we now face

Comment #5 by Sammy Arizona on 2013 07 23

Sammy is correct and you can see similar policy mistakes in subsidizing higher education loans today regardless of the quality of education and the prospects for paying back principal...lowering the interest rates on student loans is the equivalent of lowering downpayments and lending standards in general before the housing crash. Is this good public policy or a flag waving opportunity for Harkin and Whitehouse?

Comment #6 by michael riley on 2013 07 23

Yup, as always, it's Bush's fault (sarcasm)

"Time and time again, Frank insisted that Fannie Mae and Freddie Mac were in good shape. Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that "these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis." When the White House warned of "systemic risk for our financial system" unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing."


Comment #7 by Pete Pollino on 2013 07 23

The CRA signed into law by Bush's predecessor set the stage for what happened the next decade. As Pete Pollino notes above, the Friends of Angelo (Mozilo, CEO of Countrywide Bank) did their worst to suppress the excesses of Fannie Mae and Freddie Mac, which were at least the equal of what the banksters were up to.
Try reading All the Devils Are Here by McLean and Nocera for a much fuller account. It gets glowing reviews from Puffington Host and the NYT. The drawback for Sammy is that there aren't many troll worthy points, just a very sad history of the housing bubble and how it badly damaged the financial security of the most vulnerable and gullible. The only quibble I have with it is that the authors don't spend enough time on the CRA, on Glass-Steagall and on political creatures like Frank, Dodd and Raines, to name a few.

Comment #8 by Chuck Ritter on 2013 07 23

why are there always more firefighters on duty then police officers - some simple solutions - no overtime - you get paid regular rates if you have to work overtime. as people retire - do not replace them - for each retiree you can then lower minimum manning until you get to a much lower #. this way nothing changes for existing firefighters (except the overtime), but as they retire you do not replace them. the first 12 people who retire should be replaced as rescue workers - 4 more should be on staff at all times - so 12 more are needed. just my opinion - think about how most of the day there are 2 times as many firefighters on duty, then there are police officers.

Comment #9 by ed cianci on 2013 07 23

Sammy is partly correct:

"Bush foolishly pushed hard to expand home ownership, especially among minority groups, who could least afford it."

But that policy was really started and was pushed the hardest by Bill Clinton and Barney Frank. They basically told the banks they had to start writing a much higher number of subprime loans with almost no income vertification to get more lower income people into homes. They threatened the banks with all sorts of fed actions. The liberals conveniently like to blame the big banks for the economic meltdown caused by subprime lending, but it really goes back to Clinton's ideas. Media will never blame Clinton. He is a God to them.

Comment #10 by Katy Sloop on 2013 07 25

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