Adjustable Mortgage Remedies in Massachusetts
By L. Jed Berliner, Springfield Bankruptcy Attorney on May 31, 2008 in Massachusetts, Mortgages, Predatory Lending
One Massachusetts judge in particular took a courageous step to stop unfair foreclosures. On February 25, 2008, Superior Court Judge Ralph D. Gants ruled that adjustable mortgages were presumed to be unfair and in violation of Chapter 93A, the Massachusetts statutes prohibiting unfair and deceptive trade practices, if a mortgage had (1) interest which adjusted within its first three years, and (2) an initial “teaser” rate was at least 3% lower than the fully indexed rate, and (3) a borrower with a debt-to-income ratio of over 50% if the fully indexed interest rate is used, and (4) either the loan-to-value ratio is 100% (no equity), or there is a substantial prepayment penalty, or any prepayment penalty extends beyond the introductory period.
This brings similar protections to all mortgage borrowers which previously were created by statute for high cost mortgage borrowers only. The presumption means that the lender now has to prove the loan is fair, instead of the borrower having to prove that the loan is unfair. The opinion went on to rule that the particular mortgage lender, Fremont Mortgage, must give advance notice to the Massachusetts Attorney General before beginning a foreclosure proceeding, and the Court would rule on whether to permit the foreclosure to continue if no agreement was reached with Attorney General. Factors would include whether the loan is actually unfair, what reasonable steps were taken to avoid foreclosure, and whether there is any alternative to foreclosure.
I believe that this definition of presumptive unfairness can lead to other remedies under chapter 93A, including damages, punitive damages, attorney fees, and even rescission of the mortgage.
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