Lender Pays $10 Million for Wave of Repossessed Houses
Fremont General Corp., a bankrupt subprime lender based in Brea, California that contributed to the large number of repossessed houses in Massachusetts, has signed a $10 million payment agreement to settle a deceptive-lending lawsuit filed by the Massachusetts Attorney General in 2007.
Fremont, formerly one of the ten biggest subprime mortgage lenders in the country, also agreed to participate in foreclosure prevention schemes before foreclosing on the around 2,200 mortgages in the state that it holds.
According to the office of Massachusetts Attorney General Martha Coakley, the state will use the $10 million settlement to mitigate the effects of large numbers of repossessed houses in the state and to help homeowners prevent their homes from becoming repossessed houses.
Fremont, which is now operating its business under Chapter 11 bankruptcy protection, also signed not to make predatory loans in Massachusetts and not to foreclose homes without first providing other options to defaulting borrowers.
In 2008, the Suffolk Superior Court issued an injunction which held that Fremont made predatory loans that by their structure would surely lead to loan delinquency and foreclosure. The relatively large number of repossessed houses previously owned by Fremont borrowers was a visible result of the lender’s unfair lending practices.
As a reaction to the Fremont settlement, Attorney General Coakley remarked that predatory lending practices led to the destruction of the home ownership dream and that the Fremont settlement was a significant step in the pursuit of companies responsible for the rising number of repossessed houses across the state.
In October 2007, the office of Coakley sued Fremont General and its parent firm, claiming that the lender provided risky home loans to borrowers who did not have adequate income to enable them to pay the loans. Coakley’s office charged that Fremont made loans amounting to 100 percent of home values without loan documentation and screening.
The lawsuit also charged that Fremont paid third-party loan brokers to sell costly loans and provided them with financial incentives to sell more.
Fremont filed for Chapter 11 bankruptcy protection and reorganization in June 2008 in California. It began as Lemac Corp. in 1963 and became Fremont General in 1973.
Last month, the Massachusetts Attorney General has also made a $60-million settlement with investment bank Goldman Sachs Group Inc. which decided to pay to stop the state’s investigation into Goldman’s possible involvement in subprime mortgage securitization that led to large numbers of repossessed houses in the state.
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