Fremont Pays $10M In Settlement With Mass. AG

Posted by Orb Staff on June 10, 2009 No Comments
Categories : Residential Mortgage

husetts Attorney General Martha Coakley's office has entered into a settlement with Fremont Investment & Loan and its parent company, Fremont General Corp. (Fremont), to resolve the commonwealth's lawsuit against the California-based lender. Fremont has agreed to pay the commonwealth $10 million in consumer relief, civil penalties and costs. Fremont has also agreed not to foreclose upon unfair loans without certain protections for borrowers or originate unfair loans in Massachusetts. Those protections against foreclosure, which have been in place since the Superior Court issued a preliminary injunction in early 2008, are now permanent, and also apply to the loan holders and servicers who acquired the Fremont loans since the injunction was issued, according to a statement from Coakley's office. "With the $10 million we have obtained through this settlement, we have an opportunity to provide consumers and the commonwealth with additional relief from the predatory lending practices that have besieged our state and nation," the attorney general said in the statement. Under the terms of the settlement, Fremont has agreed to pay Massachusetts $8 million in consumer relief, $1 million in civil penalties and $1 million in costs, including attorneys' fees. The consumer relief funds will be used to redress the negative impact of mortgage foreclosures and predatory lending practices, as well as to provide relief to Massachusetts borrowers. Additionally, the settlement makes permanent the terms of the preliminary injunction granted last year. In that preliminary injunction, the Superior Court held that certain Fremont loans were "presumptively unfair" because by their very terms – short-term interest rates followed by payment shock, plus high loan-to-value and high debt-to-income ratios – were likely to lead to default and foreclosure. For those loans, the court established a notice and objection process before Fremont or its assignees or servicers could initiate foreclosures. Under this process Coakley's office receives the following: [list] 30 days' advance notice for loans that are either "not presumptively unfair," vacant, or not the borrowers' primary residence; and *45 days' advance notice for loans that are "presumptively unfair."[/list] If Coakley's office objects after initial notice, the parties have 15 days to resolve their dispute. If the dispute remains, then Fremont must seek court approval to foreclose. After the notice and objection process, Fremont may only proceed with a foreclosure to which Coakley objects if Fremont requests and receives approval from the Superior Court. In considering whether to allow the foreclosure, the court will consider, among other factors, whether the loan is unfair and whether Fremont has taken reasonable steps to work out the loan and avoid foreclosure. Fremont also agreed not to originate unfair loans. SOURCE: Office of Attorney General Martha

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