Attorney General Martha Coakley Enters into Affordable Loan Modification and Foreclosure Prevention Agreement with Purchaser of Fremont Servicing Rights
The agreement provides that borrowers holding Fremont loans now serviced by Carrington will receive a number of significant benefits, including:
- Loan modifications for eligible borrowers pursuant to President Obama's Home Affordable Modification Program ("HAMP modifications"), of which Carrington is a participant. Carrington will modify such loans through a variety of steps, as necessary, to ensure that borrowers have affordable monthly mortgage payments. These steps include reduced interest rates, extended amortization periods, and principal forbearances.
- Opportunities for eligible borrowers who make timely payments on their HAMP modifications to receive principal reductions, where necessary, to obtain refinancing.
- Alternatives to foreclosure for delinquent borrowers who do not qualify for loan modifications, such as short sales, deeds-in-lieu of foreclosure, or relocation payments.
- Opportunities for the Attorney General's Office to object to foreclosures and denials of loan modifications, including a requirement that Carrington obtain court approval to foreclose upon a loan where Carrington and the Attorney General's Office cannot resolve an objection.
Today's agreement is designed to address Fremont's unfair and deceptive conduct that was highlighted by the Superior Court in the injunction that the Commonwealth obtained against Fremont on February 25, 2008. The injunction prohibits Fremont from initiating or advancing foreclosures on loans that are "presumptively unfair." An expanded preliminary injunction was issued on March 31, 2008, and prohibits Fremont from assigning or selling Massachusetts loans owned by the company, or the servicing obligations on those loans, unless the buyer agrees in writing to be bound by the obligations set forth in the original injunction. The Supreme Judicial Court upheld both injunctions on December 9, 2008. Subsequently, the Attorney General's Office settled its law enforcement action with Fremont through a Final Judgment by Consent that made the preliminary injunction a permanent injunction, among other relief.
Attorney General Coakley has repeatedly advocated for reasonable loan modifications as a critical tool to prevent foreclosures. Today, she is testifying before the Legislature's Joint Committee on the Judiciary in support of legislation she is co-sponsoring that is aimed at further preventing unnecessary foreclosures. An Act to Require Commercially Reasonable Efforts to Avoid Foreclosure would require lenders or servicers to offer loan modifications in certain circumstances in order to avoid foreclosure. The bill's lead co-sponsors are Senator Susan Tucker (D-Andover) and Representative Steven Walsh (D-Lynn).
This matter is being handled by Christopher Barry-Smith, Chief of the Public Protection and Advocacy Bureau, and Assistant Attorneys General Jean Healey, John Stephan and Shannon Choy-Seymour of Attorney General Coakley's Consumer Protection Division.