The Massachusetts Supreme Judicial Court unanimously upheld a lower court injunction preventing subprime lender Fremont Investment & Loan from foreclosing on certain types of mortgage loans without first notifying the state attorney general and obtaining court approval.
The lower court had said that ”presumptively unfair” loans — the ones subject to the injunction – are those that meet four conditions:
- An adjustable rate mortgage with an introductory period of three years or less.
- An introductory interest rate at least 3% lower than the fully indexed rate, or relevant index, at the time the loan began plus the margin in the mortgage note.
- The borrower’s debt-to-income ratio exceeded 50% when calculating debt using the fully indexed rate.
- 100 percent financing, a significant prepayment penalty or a penalty extending beyond the introductory period.
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