Adjustable Mortgage Remedies in Massachusetts

31 May Adjustable Mortgage Remedies in Massachusetts

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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L. Jed Berliner, Western & Central Massachusetts Consumer Lawyer

L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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