In In re Mortgage Foreclosure Cases, a group of Rhode Island homeowners argued that their past or pending foreclosures are invalid because the assignments of their loans were invalid. This is not an unusual contention in a foreclosure case; Vincent Howard and our experienced Riverside County foreclosure defense lawyers see it all the time. But the case is unusual in other respects: the U.S. District Court for Rhode Island stopped all of the state's lawsuits in order to send them to a mandatory mediation with a court-appointed "special master." The lenders seeking to foreclose appealed that decision to the First U.S. Circuit Court of Appeals, arguing that the district court should have provided a notice and hearing and set limits on the mediation's time and cost. And also unusually, the First Circuit's decision was authored by retired Supreme Court Justice David Souter, sitting by designation.
Nearly 700 cases in the Rhode Island district court are subject to these orders. Some began in state court and were removed for diversity reasons. The district court established a special Foreclosure Docket, then stayed the cases and appointed a special master to mediate the claims. The stay effectively, though not expressly, prevents non-judicial foreclosure of the home at issue. This resulted in a flood of more such lawsuits brought originally in federal court. The instant appeal is consolidated from appeals brought by foreclosing entities that object to the stay, as well as to the lack of limits on time and expense for the mandatory mediations.
The First Circuit first dispensed with the mortgagors' argument that the stay is not an injunction against foreclosures, and only an injunction may be subject to an interlocutory appeal. The order is effectively an injunction the court wrote, and the nature of the order matters, not its name. Because the two issues are intertwined, the court said, there's also jurisdiction to hear the foreclosing entities' objections to the mediation order. On the merits, the First found that injunctions must be imposed only on notice to the adverse party, and that no party is claiming that formal notice was given here. Nor was there a hearing with appropriate findings that would create notice, the court said. Thus, it remanded the case for a hearing on whether the injunction should continue. It also ordered that the court take action on a year-old recommendation to dismiss a specific case for lack of standing. If any cases remain, the court said, they require a second hearing on time and expense limits to the mediation.
This case sounds like a win for the foreclosing mortgage companies, at least at first. But Vincent Howard and our Orange foreclosure defense attorneys note that a federal district judge will still make the most important decision: whether the foreclosure mediations should continue. Foreclosure mediations have been good to Rhode Islanders headed for foreclosure: they draw a judge's attention to a foreclosure's problems in a state where foreclosures would otherwise be non-judicial. And mediations have resulted in affordable loan modifications, according to the Brennan Center for Justice, which means homeowners stay in their homes, the neighbors' property values don't drop, and lenders still make money--just less money than they would have made by pushing someone into foreclosure. Vincent Howard and our Claremont foreclosure defense lawyers believe that's ultimately a better solution for everyone.
If you believe your lender or loan servicer pushed you into foreclosure without considering a loan modification or other circumstances, you should call Howard Law, P.C., today to discuss how we can help. You can reach us through our website or call 1-800-872-5925.