Grant funds classes to help homeowners
HYANNIS — The Hyannis-based Housing Assistance Corp. has received a $5,000 grant to help fund financial literacy education efforts.
The money, awarded by the office of state Attorney General Martha Coakley, is part of a $1.1 million grant program intended to support educational efforts that will help homeowners better understand budgeting, recognize predatory lending and avoid foreclosure.
The Housing Assistance Corp. will use its grant to implement a new curriculum addressing subjects like income and expenses, credit, financing options for home buying and the benefits of renting rather than buying.
“It’s so people can identify up front, before they start down the home-buying pathway, whether they are ready for homeownership,” said Nancy Davison, vice president of operations for the agency.
The grant money should allow the organization to offer its new program three or four times this year, Davison said. The first class is scheduled for March.
The grant money comes from a $10 million settlement between Coakley’s office and Fremont Investment and Loan, stemming from charges that the California-based lender engaged in unfair and deceptive lending practices.
Docket Report for Carroll, et al. v. Fremont Investment & Loan.
Robert Carroll, et al. v. Fremont Investment & Loan
Attorney General Martha Coakley Reaches $10 Million Settlement with Subprime Lender Fremont Investment and Loan
Attorney General Martha Coakley Reaches $10 Million Settlement with Subprime Lender Fremont Investment and Loan
Thousands of homeowners protected from foreclosure
View accompanying media:
BOSTON – Today, Attorney General Martha Coakley’s Office entered into a settlement with Fremont Investment & Loan and its parent Fremont General Corporation (“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 the Commonwealth. Those protections against foreclosure, which have been in place since the Superior Court issued a Preliminary Injunction in March 2008 are now permanent and also apply to the loan holders and servicers who acquired the Fremont loans since the injunction issued.
“The American dream of homeownership has turned into a nightmare for many borrowers because of predatory lending practices. We have vigorously sought to hold companies accountable for these practices, and today we have taken another important step toward achieving that goal.” said Attorney General Coakley. “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. We will continue to hold companies responsible for their role in the foreclosure crisis.”
Under the terms of the settlement, Fremont has agreed to pay the Commonwealth $10 million, including $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, predatory lending practices, and to provide relief to Massachusetts borrowers.
Additionally, the settlement makes permanent the terms of the preliminary injunction granted in February 2008. 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 the Attorney General’s Office receives:
- 30 days’ advance notice for loans that are either (1) ‘not presumptively unfair’; (2) vacant; or (3) not the borrowers’ primary residence.
- 45 days’ advance notice for loans that are ‘presumptively unfair.’
If the Attorney General’s Office objects after initial notice then 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 the Attorney General 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.
The Attorney General’s Office filed suit on October 5, 2007, in Suffolk Superior Court against Fremont and its parent company, Fremont General Corporation based on the defendants’ 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. The complaint further alleged that the company sold these loans through third party brokers and provided financial incentives to these brokers to sell high cost products.
As a result of the lawsuit, up to 2,200 Fremont-originated loans have been protected from unrestricted foreclosures, because the preliminary injunction allowed foreclosures to proceed only after the underlying loan was analyzed for unfair, ultra-risky loan criteria. Although Fremont originated about 15,000 loans in Massachusetts from 2004 through 2007, only 2,200 of those loans remained “live” when the lawsuit commenced. Even though most of the 2,200 loans had been transferred to new holders and servicers, the Superior Court’s preliminary injunction required that those holders also were restricted by the court’s order.
The enforcement action against Fremont is a central part of Attorney General Coakley’s initiative to combat predatory lending. The settlement follows the unanimous decision from the state’s highest court, the Supreme Judicial Court, in December 2008 which affirmed the Superior Court’s order barring Fremont from foreclosing on any structurally unfair loan without court approval. That decision confirmed the fundamental aspects of the Commonwealth’s case against Fremont, namely that a lender’s failure to reasonably assess a borrower’s ability to repay his or her loan and the use of loan features that predictably lead to foreclosure is unfair and deceptive in violation of Massachusetts law. The SJC further affirmed it is unfair and a violation of the Massachusetts law to originate loans in such a manner that would lead predictably to a borrower’s default and foreclosure, even if such loans are underwritten with the assumption that borrowers could refinance out of the loans.
Attorney General Coakley has undertaken a multifaceted approach to combat the foreclosure crisis and predatory lending. This initiative includes Attorney General Coakley’s latest inquiry into the role of securitizers—those who bundled mortgage loans and sold them as mortgage-backed securities or other investments—and recent $60 million settlement with Goldman Sachs for its role in securitizing subprime loans, including subprime loans originated by Fremont. The Attorney General’s Office has also sued Option One and its parent H&R Block, alleging unfair, deceptive and predatory lending practices, and obtained preliminary injunctions against those companies. The Office also promulgated consumer protection regulations, effective in January 2008, governing mortgage lenders and brokers. In addition, the Attorney General’s Office has also brought civil and criminal actions against local lenders and brokers who engaged in fraudulent lending activity, or who perpetrated foreclosure rescue or loan modification scams.
This matter was handled by Assistant Attorneys General Jean Healey, John Stephan, and Shannon Choy-Seymour of the Consumer Protection Division, Financial Investigator Christine Murphy, and Assistant Attorney General Christopher Barry-Smith, Chief of the Public Protection and Advocacy Bureau.
FDIC Issues Cease and Desist Order Against Fremont Investment & Loan, Brea, California, and its Parents
FDIC’s press release regarding the Cease & Desist Order:
The actual Cease & Desist Order:
Our orginator was Fremont Investment & Loan in Dec. 2006 shortly before this ‘cease & desist.” They transferred my loan to Wilshire Credit Corp., a shady mortgage servicing company. They proceeded to foreclose on our home in January 2009.
We signed fraudulent closing papers with Fremont – a lender that was forced by FDIC to “cease & desist” its lending! I had an audit done and found violations.
Oh, I requested the “Note” from Wilshire and they apparently don’t have it – which appears means they weren’t in the position to foreclose.
Who do I sue the originator (Fremont Investment & Loan) or mortgage servicing company (Whilshire)?
March 8, 2007
On March 8, 2007 the Federal Deposit Insurance Corporation (FDIC) issued a cease and desist order against Fremont Investment & Loan, Brea, California (”Bank”), and its parent corporations, Fremont General Corporation and Fremont General Credit Corporation. The FDIC found that the bank was operating without effective risk management policies and procedures in place in relation to its subprime mortgage and commercial real estate lending operations. The FDIC determined, among other things, that the bank had been operating without adequate subprime mortgage loan underwriting criteria, and that it was marketing and extending subprime mortgage loans in a way that substantially increased the likelihood of borrower default or other loss to the bank.
The order sets forth a variety of corrective actions to be undertaken. The order requires that the bank adopt a five-year strategic plan for its business. The order also requires that the bank, within 90 days, adopt a subprime mortgage lending policy with provisions designed to correct its lending practices, including that it underwrite future subprime loans with an analysis of the borrower’s ability to repay at the fully indexed rate and provide borrowers with clear information about the benefits and risks of the products. The order also requires the bank within 90 days to describe efforts it will make to restructure loans in distress consistent with the marketability of such loans and with sound principles of underwriting. In addition, the order requires the bank to fully comply with all consumer protection laws. The order also requires the bank to correct its commercial real estate lending practices.
Source of post: FDIC press release.
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- Wilshire has been named as a defendant in dozens of lawsuits filed in the past two years.