1st Circuit throws foreclosure process into limbo, orders action

A federal appeals court has sided with lenders challenging an injunction in Rhode Island’s improper foreclosure case, remanding the case back to U.S. District Court for further review. More

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1st Circuit throws foreclosure process into limbo, orders action

BLOOMBERG FILE PHOTO/DANIEL ACKER
THE FIRST CIRCUIT COURT OF APPEALS handed down a decision late last week that throws the work of U.S. District Court in Rhode Island into limbo, demanding that foreclosure cases that were going through mediation to be solved more quickly.
Posted 6/18/13

BOSTON – A federal appeals court has sided with lenders challenging an injunction in Rhode Island’s improper foreclosure case, remanding the case back to U.S. District Court for further review.

The decision, handed down late Friday by the First Circuit Court of Appeals, throws the mediation work of Special Master Merrill W. Sherman, who has been working toward settlements between homeowners facing eviction and the lenders they’ve sued for improper foreclosures, into uncertainty.

Reached by phone Monday, Sherman, former president and CEO of Bank Rhode Island, said she did not know how the decision would ultimately affect the mediation, as she hadn’t yet had a chance to discuss it with U.S. District Court Judge John J. McConnell, who appointed her.

McConnell consolidated Rhode Island’s foreclosure cases, ordered defendant lenders to halt any foreclosures and named Sherman special master to conduct mediation 18 months ago. There are now more than 700 active suits by struggling Rhode Island homeowners against lenders included within the special master’s purview.

The appeals court found that McConnell failed to follow the proper procedure when he barred all defendants in the case from completing foreclosures until going through mandatory mediation process of indefinite length.

In its decision, the appeals court ordered McConnell to hold a hearing to determine whether an injunction is warranted and, if so, to establish time and costs limits.

The appeals court considered throwing out the injunction completely, according to the decision, but decided against it out of “fear that the practical effect of requiring such immediate action on a docket currently the size of this one would be chaos.”

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