Martha Coakley (D)
BOSTON (Legal Newsline)-The Massachusetts attorney general's office entered into an agreement Thursday with a California company to modify "structurally unfair" mortgage terms.
Attorney General Martha Coakley's deal with WMD Capital Markets LLC, which purchased the loans originated by Fremont Investment & Loan, affects about 200 state borrowers, she said in a statement.
"This agreement shows that lenders, holders and servicers are able to take aggressive steps to make predatory subprime loans affordable for borrowers," Coakley said in a statement.
"While many lenders and servicers have talked about loan modifications, this agreement reflects WMD Capital's real commitment to treating Fremont borrowers fairly and our office's commitment to achieving loan modifications to help combat foreclosures."
WMD Capital Markets is a privately held investment company.
Under the agreement, the attorney general said borrowers are entitled to a permanent reset of the applicable interest rate to the borrower's introductory rate, a one-time charge-off of unpaid late fees and past due interest, and a reduction of the monthly payment to a level the borrower can afford for up to three years.
Eligible borrowers also have the option of adjusting their monthly mortgage payment to an affordable amount.
The attorney general's office filed a lawsuit October 5, 2007, in Suffolk Superior Court against Fremont and its parent company.
The complaint alleges that Fremont sold risky loan products that it knew were designed to fail, including 100 percent loan-to-value Hybrid ARM loans that would experience significant payment shock in two or three years, as well as "no documentation" loans.
The complaint further alleges that the company sold these loans through third party brokers and provided financial incentives to these brokers to sell high cost products.
From Legal Newsline: Reach reporter Chris Rizo at chrisrizo@legalnewsline.com.