Several states, including Rhode Island, allow mortgage holders to pursue a non-judicial foreclosure of a mortgaged property if a borrower allows a loan to go into default. As a result of this legal framework, mortgage holders can seize and sell property from an owner without pursuing a formal judicial proceeding, potentially limiting a borrower’s ability to challenge the foreclosure.
To protect borrowers from this framework that generally favors lenders, state legislatures and courts have established detailed notice and procedural requirements that lenders must follow to pursue a foreclosure successfully. If a lender does not strictly follow these requirements, a borrower has the right to challenge the foreclosure in a state court proceeding. Courts are not hesitant to invalidate foreclosures, even when the procedural defect by the lender may appear minor, as evidenced by a recent ruling by the Rhode Island Supreme Court.
The plaintiff in the recently decided case is a homeowner whose home was foreclosed on after he failed to pay mortgage payments to the bank for several years. The bank pursued a non-judicial foreclosure of the property, and sent the plaintiff notice of his rights and options to prevent or challenge the foreclosure. The plaintiff failed to meet the bank’s demands, and the bank ultimately seized and sold the property.
The mortgage at issue contained detailed notice requirements that the lender must provide in the event of a default and foreclosure. One of the provisions in the mortgage contract required the foreclosing lender to give notice to the borrower that they could reinstate the mortgage after the loan had been accelerated by paying any past due amount as well as other fees and expenses. The notice given to the plaintiff by the defendant did not contain this language, instead referring to the plaintiff’s ability to cure a default before the loan was accelerated. The plaintiff filed suit against the defendant after the foreclosure sale, claiming that the sale was invalid because of the defect in the notice requirement.
The trial judge determined that, while the required language was not contained verbatim in the given notice, the alternative language regarding the plaintiff’s ability to cure the default was sufficient to meet the procedural requirements. As a result of this ruling, the district court dismissed the plaintiff’s case and ruled that the foreclosure sale was valid.
The plaintiff appealed the ruling to the Rhode Island Supreme Court, arguing that the difference between the actual language of the notice and the required language was sufficient to invalidate the mortgage. The high court agreed with the plaintiff, ruling that in a state which allows non-judicial foreclosures such as Rhode Island, the notice requirements within mortgage contracts must be strictly followed for a foreclosure to be valid. The court rejected the defendant’s arguments that the plaintiff was not prejudiced by the differing language, holding that whether language differences prejudice a borrower is not relevant, and the notice requirements must be followed no matter what. With this ruling, the plaintiff was awarded ownership of the foreclosed property, and the previously executed foreclosure sale was held to be null and void.
Are You Facing or Attempting to Perform a Foreclosure?
Whether you are a borrower facing a foreclosure or a lender who seeks to foreclose a property after a loan has gone into default, this recent ruling illustrates that performing a non-judicial foreclosure in Rhode Island is anything but a sure bet. Having a qualified Rhode Island foreclosure attorney to advise and represent you throughout the process can make the difference in achieving your goals. The experienced Rhode Island real estate attorneys at Bilodeau Capalbo, LLC, have the knowledge and dedication required to help you overcome whatever real estate legal issues you are facing. Contact our offices at 401-300-4055 to discuss your situation with an attorney at Bilodeau Capalbo today.