RI Federal Court Issues Order Staying Certain Foreclosure Challenge Cases

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U.S. District Court Judge John J. McConnell, Jr. issued an Order on August 16, 2011 (the “Order”) staying “all mortgage foreclosure cases currently pending in the United States District Court for the District of Rhode Island . . . assigned to” him. The federal court recently assigned the vast majority of mortgage foreclosure challenges to Judge McConnell and Magistrate Judge Lincoln D. Almond after Magistrate Judge David Martin’s Reports and Recommendations in the Cosajay and Fryzel cases resulted in several foreclosure challenge matters being removed to the U.S. District Court from Rhode Island Superior Court. The Court has established a Master Docket for the management of these certain foreclosure challenges entitled “ In re: Mortgage Foreclosure Cases, 11-mc-88- M-LDA.”

It is important to note that contrary to what is being reported in the media, the foreclosure cases that are subject to the Order (the “Mortgage Foreclosure Cases”) are NOT all Rhode Island foreclosure cases, nor are all Rhode Island foreclosure cases which are in litigation in the Rhode Island federal court subject to the Order. It is likely, however, that foreclosure cases with standing issues that are currently pending in federal court in Rhode Island and that are filed in the future in the Rhode Island federal court, will be subject to the stay if the stay of the Order is still in place. Furthermore, while it has been reported that the purpose of the Order is to stay all Rhode Island foreclosures to allow for loss mitigation and mediation, we do not believe that to be the sole intent of Judge McConnell or the Order. Although the Order does require all parties to engage in direct and serious settlement discussions, the overall thrust of the Order is to provide an organized procedure by which the Court can resolve the standing issues and authority to foreclose issues that have been raised in all of the Mortgage Foreclosure Cases. The standing issues are similar to issues being raised in foreclosure challenges across the U.S., and in many of the Mortgage Foreclosure Cases, the Mortgage Electronic Registration System (“MERS”) is a party defendant.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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