Woonsocket residents will now benefit from statewide protections against losing their homes in a tax sale after the state housing finance agency announced Thursday it would no longer exclude local homeowners from a program designed to prevent foreclosure.
Under the Madeline Walker Act, Rhode Island Housing has the authority to purchase tax liens placed on property when homeowners get behind on their bills before investors, offering protection to homeowners on the brink.
Last year, The Public’s Radio exposed that Rhode Island Housing had stopped purchasing liens in Woonsocket under the Madeline Walker Act in 2016, following a disagreement with local leaders over vacancy taxes. At the time, The Public’s Radio identified nearly three-dozen homeowners who had faced foreclosure, despite appearing eligible for the law’s protections.
“We need to work with them,” said Woonsocket Mayor Christopher Beauchamp. “There’s a housing crisis everywhere, right?”
The city’s disagreement with Rhode Island Housing related to the tax-sale process. Rather than deal with settling debts directly with homeowners, local governments and utility companies in Rhode Island routinely collect on overdue bills by attaching a lien to property and holding a tax sale. At an auction, investors can buy the lien in exchange for paying the overdue bills. That means an investor has a right to the property unless the homeowner pays them back. If homeowners can’t pay off the initial bills plus interest and fees within a year, investors can foreclose on the home.
The Madeline Walker Act allows Rhode Island Housing to purchase homeowners’ tax debt before investors can scoop it up, giving homeowners more time and leeway to pay off what they owe. The act, passed in 2006, was named for an elderly woman in Providence who lost her house after falling behind on her water bills. An investor purchased the lien the city placed on her home for $836.
Rhode Island Housing had quietly stopped purchasing tax liens in Woonsocket after the city insisted on charging the agency vacancy taxes for properties it was obligated to hold for a certain number of years. After The Public’s Radio published its investigation, the Woonsocket City Council held a public meeting with representatives of Rhode Island Housing to talk about the possibility of restarting the program locally.
“There was enough interest from enough council members that felt that this was an important program for their constituents,” said Leslie McKnight, director of loan servicing at Rhode Island Housing.
Last September, the council passed a resolution committing to working with the agency to do just that. For Rhode Island Housing to reconsider its policy on purchasing liens in Woonsocket, the agency said the city would have to amend its non-utilization tax law to exempt the agency — a step cities like Providence had taken years prior.
“We needed to make sure that we would not be subject to that non-utilization tax,” McKnight said.
In June, an ordinance amending the vacancy tax policy to include such an exemption passed the council unanimously.
If a homeowner is really struggling to keep up with bills, Garrett Mancieri, a city councilor in Woonsocket, said “we want to help keep them in their homes as opposed to force them out and try to sell it to somebody else.”
Woonsocket plans to hold its next tax sale in November. Rhode Island Housing will send notice out to homeowners who are eligible for the Madeline Walker program in advance of the sale, offering help.