August 18, 2009 - For immediate release:
Attorney General Coakley Reaches Affordable Loan Modification and Foreclosure Prevention Agreement with Purchaser of Fremont Servicing Rights
- Attorney General Martha Coakley’s Office has entered into an agreement with Texas- based Litton Loan Servicing LP (“Litton”) that provides significant benefits to approximately 1,100 borrowers holding loans originated by Fremont Investment & Loan (“Fremont”). The Fremont loans were the subject of the Attorney General’s recently settled enforcement action against Fremont which alleged that the loans were predatory and unfair. In June 2008, Litton purchased certain mortgage servicing rights from Fremont, thereby becoming subject to certain obligations under a preliminary injunction issued by Suffolk Superior Court against Fremont in March 2008. That injunction was upheld by the Supreme Judicial Court in December 2008, and became a permanent injunction in June 2009 under a Consent Judgment entered against Fremont. The Attorney General’s Office and Litton reached an agreement to memorialize Litton’s obligations under the permanent injunction, including how loans previously serviced by Fremont would be modified in order to avoid unnecessary foreclosures and mitigate Fremont’s unfair and deceptive lending practices.
“As we have worked to address the fallout of the subprime lending crisis in Massachusetts over the past several years, one of our main goals has been to help those homeowners who fell to victim unfair and deceptive lending practices to stay in their homes,” said Attorney General Martha Coakley. “Today’s agreement with Litton is yet another step toward that goal, and it will provide much-needed relief to over a thousand homeowners. As we have stated repeatedly, we believe that loan modifications are key to stemming the tide of foreclosures in our state, and indeed, across the nation.”
The agreement provides that borrowers holding Fremont loans now serviced by Litton will receive a number of significant benefits, including:
- Loan modifications for eligible borrowers pursuant to President Obama’s Making Home Affordable Plan, of which Litton is a participant. Litton will modify those loans through a variety of steps, as necessary, to provide borrowers affordable monthly mortgage payments. These steps include reduced interest rates, extended amortization periods, and principal forbearances.
- 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 Litton obtain court approval to foreclose upon a loan where Litton and the Attorney General’s Office cannot resolve an objection.
- Sessions with Litton representatives to be held in Massachusetts during the next month to foster borrower contact and promote sustainable loan modifications.
Today’s agreement is designed to remedy Fremont’s unfair and deceptive conduct that was highlighted by the Superior Court in the injunction that the Commonwealth first 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 lawsuit against Fremont through a Consent Judgment that made the preliminary injunction a permanent injunction, and required payment of $10 million to the Commonwealth.
This matter was handled by Assistant Attorney General Jean Healey, with assistance from John Stephan and Shannon Choy-Seymour of the Consumer Protection Division, and Chris Barry-Smith, Chief of the Public Protection and Advocacy Bureau.