August 2024
Christopher Henry, Esq.
RI Housing Providence
"Rhode Island law requires that a foreclosing lender strictly comply with the contractual terms of the mortgage and relevant statutes during the foreclosure process, or risk voiding the foreclosure."
Introduction
Foreclosures in Rhode Island are about to get a lot less complicated. The General Assembly has passed House Bill 8325 ("H8325"),[1] which is a statutory construction bill typically introduced at the end of the legislative session and used to make technical amendments to the General Laws prepared at the recommendation of the law revision office. This year, among other things, the statutory construction bill, which was sponsored by Rep. Christopher Blazejewski and Rep. Michael Chippendale, is being used to correct a loophole in Rhode Island foreclosure law that will finally put an end to six years of confusion and inconsistency that originated when the Legislature passed the law creating the mediation requirement for lenders who are foreclosing on mortgages.
Generally speaking, Rhode Island's non-judicial mortgage foreclosure process is intended to be a straightforward affair governed by the terms of the mortgage contract and the statutes in effect at the time. Mortgage contracts typically contain clauses that set forth the steps that mortgagees must take to accelerate a debt and foreclose on the mortgage pursuant to applicable law (also known as the "Statutory Power of Sale"). R.I. Gen. Laws § 34-27-1, et. seq. lays out the specific procedures that foreclosing mortgagees must follow if they want to foreclose on a mortgage in Rhode Island.
If a foreclosing mortgagee were to review R.I. Gen. Laws § 34-27-1, et. seq., as it was presented in the Rhode Island General Laws immediately prior to the passage of H8325, they would have noted that R.I. Gen. Laws § 34-27-3.1 had been repealed in 2014 and would have been under the impression that Rhode Island law prescribed only three non-judicial foreclosure requirements.[2] These requirements would have been: 1) service of a notice to the mortgagor stating that the mortgagee may not foreclose on the mortgage without first participating in a mediation conference with the mortgagor pursuant to § 34-27-3.2 (the "Mediation Notice"); 2) mailing a notice of the time and date of the foreclosure sale to the mortgagor with required language regarding the rights of service-members[3]; and 3) publication of a notice of sale in a public newspaper for three consecutive weeks immediately prior to the sale date.[4] However, in order to get insurable title to a foreclosed property between July 1, 2018 and the passage of H8325, Rhode Island's title insurers also required foreclosing mortgagees to comply with R.I. Gen. Laws § 34-27-3.1. This came as a surprise to mortgagees who were initiating foreclosures for the first time in Rhode Island during this time because R.I. Gen. Laws 34-27-3.1 was apparently intended to have been repealed in 2014.
The 45-Day Letter Dilemma
What is R.I. Gen. Laws § 34-27-3.1, and why was compliance required when the statute was supposed to have been repealed a decade ago?
Prior to 2013, R.I. Gen. Laws § 34-27-3.1 was the law of the land. It required foreclosing mortgagees to send notice of their intent to foreclose and the availability of foreclosure counseling to certain mortgagors 45 days prior to initiating foreclosure (the "45-Day Letter"). Failure to send the 45-Day Letter would render the subsequent foreclosure void.[5]
In 2013, Public Laws 2013 Ch. 325 and 2013 Ch. 406 were signed into law (collectively, the "2013 Public Law"). The 2013 Public Law created R.I. Gen. Laws § 34-27-3.2, requiring foreclosing lenders to serve the...
