CA Lender’s Foreclosures in Massachusetts Stalled Without MA Attorney General’s Consent
A Massachusetts judge advanced a public policy argument finding it, "…unfair to approve a mortgage loan that the borrower cannot reasonably be expected repay if housing prices were to fall…”
The judge indicated loans are “presumptively unfair” under our consumer protection law (MGL Ch. 93A) when they: include an adjustable rate mortgage (ARM) which is adjustable within 3 years; carry an interest rate of at least 3 percent less than the indexed rate; involve borrowers with debt to income ratios above 50%; and have 100% loan to value ratios, or have prepayment penalties that are significant or which last longer than the initial “teaser” period.
Although the loans weren’t fraudulently induced, the judge issued a preliminary injunction and offered, “Just because we, as a society, failed earlier to recognize that loans with these ... characteristics were generally unfair does not mean that we should ignore their tragic consequences and fail now to recognize their unfairness." See Eric T. Berkman’s article in Lawyer’s Weekly, "Lender's 'subprime' foreclosures require attorney general's OK".
How does the injunction work? In this case the California lender must notify the AG’s Office before foreclosure. The AG’s office has 30-45 days to respond (depending on circumstances). If the AG objects, the lender and AG must attempt to work it out in 15 days. If it’s not worked out, the lender needs Superior Court approval to proceed.
