Posted Oct 05, 2007 10:06 pm CDT
In a legal action that takes an aggressive and perhaps unprecedented approach to the nationwide mortgage foreclosure crisis, the Massachusetts attorney general is blaming a California-based subprime lender as a “significant” cause of the debacle and seeking damages and an oversight role over all of its foreclosures.
Martha Coakley filed suit today in Suffolk Superior Court, contending that Fremont General and Fremont Investment and Loan “engaged in unfair and deceptive conduct on a broad scale” in Massachusetts, she explains in a press release.
The subprime lender knew or should have known it was selling risky mortgage products that “were designed to fail,” the release states, citing as examples 100 percent financing; so-called liar loans, in which the borrower’s stated income isn’t verified by the lender; and adjustable rate mortgages offered with artificially low initial teaser terms, resulting in large monthly payment increases after only a few years. Fremont also failed to monitor the deceptive and unfair conduct of its mortgage brokers, and engaged in unfair or deceptive loan servicing conduct which led to unnecessary foreclosures, Coakley contends.
Her suit, which is the first brought against a mortgage lender under the Predatory Home Practices Act of 2004, seeks civil penalties, restitution and an injunction providing for prior attorney general review of all Fremont foreclosures in the state.
Fremont says in a press release that it believes the suit is without merit and intends to defend it vigorously. Fremont “is continuing to work with regulators throughout the country to help delinquent borrowers retain home ownership through loan modifications and other proactive measures,” the release states. “The company finds it regrettable that the Massachusetts attorney general has abandoned these cooperative efforts to help borrowers keep their homes.”
Boston Herald (“AG Coakley sues big subprime lender Fremont”).