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Consumer Law Keyed to Pridgen, 5th Ed.
Commonwealth v. Fremont Investment & Loan
Citation:
452 Mass. 733, 897 N. E. 2d 548 (2008)Facts
Between January 2004 and March 2007, Fremont Investment & Loan, a California industrial bank, originated 14,578 mortgage loans to Massachusetts residents secured by their homes. Approximately fifty to sixty percent were subprime loans. Most featured adjustable rate mortgages with low introductory rates for two or three years, then adjusting to substantially higher variable rates. Fremont qualified borrowers based on their ability to make introductory-period payments, not the higher fully indexed rate payments. Many loans had 100% loan-to-value ratios achieved through piggyback loans. Fremont typically sold loans on the secondary market, insulating itself from default losses. By 2007, significant numbers of loans were in default. Analysis of ninety-eight defaulted loans showed all were ARMs with substantial payment increases and ninety percent had 100% loan-to-value ratios. Fremont entered a consent agreement with the FDIC in March 2007 to cease unsafe lending practices and stopped originating loans.
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