In a move that may set off similar actions in other states, the office of Massachusetts Attorney General Martha Coakley put out a press release this morning announcing that the AG's office has reached an agreement with Fremont Investment & Loan that will see the former subprime lender halt all Massachusetts foreclosures for 90 days to allow for a review by state officials.
Under the agreement, Fremont will cease foreclosures on loans it originated in the state in order to provide the Attorney General a 90-day review period. During that time, the Attorney General's Office may object to any foreclosure that it determines may be tainted by unfair or deceptive lending practices. Fremont will pay the costs of the loan review process under the terms of the agreement.
The moratorium affects more than 2,000 subprime mortgages currently serviced by Fremont in the state, plus an additional 290 loans held for sale. The terms of the settlement agreement mean that Fremont cannot sell the loans in question until a review has been completed.
Under the agreement, the Attorney General's Office may object to a foreclosure or transfer of loans if it believes Fremont's lending or foreclosure practices violated consumer protection laws. If the Attorney General objects, a potential payment plan or other relief with respect to the loan will be requested.
This is going to hit Fremont's bottom line -- they're footing the bill for all of this, if I'm reading the press release properly. The obvious question here is whether other states -- New York and Colorado come immediately to mind -- will soon follow Coakley's lead, and whether these states will seek similar moratoriums against other large subprime players.