Coakley
BOSTON (Legal Newsline) - Fremont General Corp. is paying $10 million to settle allegations brought by the Commonwealth of Massachusetts that it gave out unfair home loans.
Massachusetts Attorney General Martha Coakley made the announcement Tuesday, noting that $8 million of the settlement will be used for consumer relief, $1 million for civil penalties and $1 million in court costs and attorneys fees.
Fremont Investment & Loan also agreed not to foreclose on allegedly predatory loans without certain protections for the borrowers.
"We have vigorously sought to hold companies accountable for these practices, and today we have taken another important step toward achieving that goal," Coakley said.
"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 protections for borrowers have been in place since a March 2008 preliminary injunction and became permanent with the settlement.
The loans, deemed "presumptively unfair" by the Superior Court, featured short-term interest rates followed by payment shock, plus high loan-to-value and high debt-to-income ratios, Coakley said.
Coakley's office receives 30 days' advance notice for loans that are not presumptively unfair, vacant or not the borrowers' primary residence, and 45 days' advance notice for the "presumptively unfair" loans.
Coakley's office can object after the notice, and the parties then have 15 days to resolve the dispute. If that doesn't work, Fremont must get court approval to foreclose.
The October 2007 lawsuit alleged Fremont was selling risky loan products through third-party brokers provided with financial incentives to sell high-cost products.
From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.