Judge’s landmark ruling could slow foreclosures (Subprime loans presumptively unfair)

[Robbien]

Source: Boston Herald

A Suffolk Superior Court judge has issued a potential landmark order slowing down thousands of Massachusetts foreclosures and declaring whole classes of subprime mortgages “structurally unfair” under state law.

“It is both imprudent and unfair to approve mortgage loans that the borrowers cannot reasonably be expected to repay if housing prices were to fall,” Judge Ralph Gants wrote in a preliminary injunction against notorious subprime mortgage lender Fremont Investment and Loan. “Just because we as a society failed earlier to recognize that (many subprime loans) were generally unfair does not mean that we should ignore their tragic consequences and fail now to recognize that unfairness.”

Issuing a ruling in a lawsuit brought by Attorney General Martha Coakley, Gants ordered Fremont to work with state officials for up to 90 days to resolve late-mortgage cases before initiating foreclosure proceedings.

If the two sides fail to settle, Fremont can then foreclose on a home, but must prove it took “reasonable steps” to avoid doing so.

The ruling potentially covers some 3,000 Massachusetts mortgages issued or serviced by Fremont, one of the nation’s largest subprime lenders.


Read more: http://www.bostonherald.com/business/real_estate/view.bg?articleid=1076105

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More details from Reuters:
http://www.reuters.com/article/BANKSL/idUSN2635793820080226

A loan would meet the definition of "presumptively unfair" if it was an adjustable rate mortgage with an introductory period that was three years or less, or if it had a beginning "teaser" interest rate that was at least 3 percentage points lower than the fully-indexed rate, she said.

Further, the definition of these unfair loans included ones made to borrowers whose debt-to-income ratio would have topped 50 percent if Fremont had measured the debt by the amount due under the fully-indexed rate.

Finally, the loan would be "presumptively unfair" if it had a substantial penalty or one that lasted beyond the introductory period, she added.

[aquart]

1. Sounds like a useful standard.

Will it help????

[flvegan]

2. Whoa.

Hello case law, yes?

[baldguy]

3. When a person suffers from a parasitic infection

a doctor should administer treatment to kill the parasite - not just make it so that the parasite can get enough blood to survive without killing the host.