The latest on real estate recordings and new technology from the Middlesex North Registry of Deeds in Lowell
With Congress poised to enact some type of legislation related to the foreclosure crisis – the Senate wants to assist investment banks and big home builders while the House seems for focused on borrowers on the verge of foreclosure – the question “why help any of them” is inevitable. An objective explanation of how some borrowers got into home loans that they could not afford is offered in the “Findings of Fact and Conclusions of Law on [Commonwealth’s] Motion for a Preliminary Injunction” in the case of Commonwealth of Massachusetts vs Fremont Investment and Loan. Fremont was quite active as a subprime lender during the height of the real estate boom, leaving it with many properties to be foreclosed after the collapse of the market. Attorney General Martha Coakley’s office brought suit seeking to prevent the foreclosure of loans that the AG contended were the result of unfair and deceptive practices by Fremont. Suffolk Superior Court Judge Ralph Gants agreed an issued the injunction against further foreclosures by Fremont, setting out a four part test that if passed, would create a presumption that a loan was “structurally unfair” meaning such a loan would be presumed to be an unfair business practice under the state’s Consumer Protection law. The four elements were: (1) that the loan was an adjustable rate mortgage with an introductory period of three years or less; (2) the loan had an introductory or ‘teaser’ rate for the initial period that was at least 3 percent lower than the fully indexed rate; (3) the borrower had a debt-to-income ratio that would have exceeded 50 percent if the lender’s underwriters had measured the debt, not by the debt due under the teaser rate, but by the debt due under the fully indexed rate; and (4) the loan-to-value ratio is 100 percent or the loan carries a substantial prepayment penalty or a prepayment penalty that extends beyond the introductory period. Gants’s ruling was only issued on February 25, 2008, so the case probably has a way to go before it’s ready for trial, but the ruling is significant in that it finds a presumption of unfairness even thought the borrower was or should have been fully aware of the terms of the loan but entered into it anyway.
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