Court Ruling Halts Foreclosure Proceedings

February 28th, 2008 | Tags: Foreclosure

In Massachusetts a court has ordered Fremont Investment & Loan of California dealing in sub-prime lending, to put on hold foreclosure proceedings to allow the official of the state to scrutinize each mortgage. The order was issued on 26^th February 2008 by Suffolk Superior Court. In October 2007 a legal suit had been filed by Attorney General of Massachusetts, Martha Coakley alleging that Fremont had engaged in dubious predatory lending. Loans had been peddled to those who could ill afford to run them.

In the order covering 29 pages, Justice Ralph Gants said that it appeared that many of the loans advanced by the company seemed to infringe upon the laws of the state as being ‘structurally unfair’. The latter included four criteria – one being the shooting up of rates after expiry of initial period. Nearly 2,200 mortgages come under this cloud. Side by side with the judiciary, the state is also trying to find ways to help the borrowers.

Lawyer Gary Klien says there has never been anything like this before in Massachusetts. It is a relief that those in power are beginning to understand the plight of the foreclosure victims. The lawyers representing Fremont were not available for comment.

A time schedule has now been chalked out to put on hold the foreclosure proceeding so that each loan can be analyzed and objection points tabulated. The order is very comprehensive covering a large number of borrowers. The borrowers can now modify their loans and if they cannot at all continue, then they have the time to search for alternative accommodation.

The court explained that foreclosure proceedings can be halted if the low introductory rate rises at least 3% over the initial one, monthly payments are half or more the income of the borrowers and the mortgage waives off down payment. Many, if not all, of the Freemont loans will be found to be within this category, commented Thomas Callahan of the Massachusetts Affordable Housing Alliance.

The sub-prime loan scheme was launched to help those who could not avail of prime mortgages because of low credit ratings and modest income. The laudable intention was that all could realize the great American dream of owning a house. But the plan went awry largely because the lenders motivated by investment and speculation aggressively persuaded borrowers to take loans they could ill afford – leading to the foreclosure fiasco of today.