Fremont Investment & Loan Case Study

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FACTS Fremont Investment & Loan (Fremont) (defendant) initiated a number of subprime, adjusted rate mortgage loans to Massachusetts residents, most of which required an increase in payments after the first two or three years and required no down payment. Many of these loans ended up going into default and Fremont entered into an agreement with the Massachusetts Attorney General (plaintiff), agreeing to consult the Attorney General before foreclosing on any of the loans. The Attorney General ended up objecting to most of the foreclosures and brought a consumer protection enforcement action against Fremont, claiming that in issuing this series of subprime mortgages, Fremont acted unfairly and deceptively in violation of the Massachusetts consumer…show more content…
The Commonwealth of Massachusetts, acting through the Attorney General’s office brought a consumer protection enforcement action against the defendant, Fremont Investment & Loan claiming that in originating and servicing 14,578 loans, 50-60 percent of such loans were “subprime” mortgage loans on borrowers’ homes between 2004 and 2007 acted unfairly and deceptively in violation of M.G.L. c. 93A § 2. Fremont’s ability to foreclose on loans with features that the judge described as “presumptively unfair.” Issue. Whether the subprime loans made by Fremont constituted unfair and deceptive acts in violation of M.G.L. c. 93A, § 2. Held. The marketing of loans with these features constituted unsafe and unsound banking practice with clearly harmful consequences for borrowers. Such unsafe and unsound conduct by the lender leads directly to injyry for consumers, qualifying as “unfair” under G.L. c. 93A, § 2. Simply because the actions of the lending institution are not specifically barred by M.G.L. c. 93A § 3, does not mean that the combined actions are permitted by any State of Federal organization, here these actions were not permitted. A judgment is to be entered affirming the grant of the preliminary injunction and remanding the case to the Superior Court for further

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