Preliminary Injunction Restricts Fremont's Ability to Foreclose in Massachusetts
In a move that may set a precendent elsewhere, Massachusetts Attorney General Martha Coakley’s Office said Wednesday that it had obtained a preliminary injunction in a case against California-based Fremont General and Fremont Investment and Loan. The order prohibits Fremont from initiating or advancing foreclosures on a wide range of loans, including loans financed at 100 percent LTV or 2 to 3-year hybrid adjustable-rate mortages. At the very least, the order will instantly add to foreclosure timelines in the state a minimum of 30 days. The injunction order will force Fremont to provide the AG's office with at least a 30-day notice of all foreclosures it intends to initiate for the approximately 2,200 loans that Fremont still owns and services, and allow the AG an opportunity to object to the foreclosure going forward. If Fremont issued a loan considered "presumptively unfair" -- which includes 100 percent LTV and 2- and 3-year ARMs -- and the borrower occupies the property as his or her principal dwelling, the AG has 45 days to object to the foreclosure. "We are pleased by the Court’s decision and the relief it will offer to homeowners and communities suffering from the effects of Fremont’s loans,” said Coakley. "This decision shows again that in many cases, irresponsible and unlawful lending practices caused this foreclosure crisis. We intend to hold accountable those who allegedly engage in unlawful lending conduct." Other loans captured under the "presumtively unfair" umbrella established in the ruling include any mortgage where the teaser rate is 300 basis points below the fully-indexes rate, as well as loans where the borrowers debt-to-income ratio exceed 50 percent at the fully-indexed rate. The Attorney General’s Office originally filed suit on October 5, 2007 against Fremont and its parent company, Fremont General Corporation, based on claims of "unfair and deceptive loan origination and sales conduct." The complaint specifically alleges that the company was selling risky loan products that it knew was designed to fail, such as 100% financing loans and “no documentation” loans. In addition to the injunctive order awarded today, the AG is also seeking civil penalties and restitution. Last July, Fremont agreed to a 90-day foreclosure moratorium in the state as part of negotiations with Coakley's office prior to the lawsuit being filed. Click here to download the full preliminary injunction.