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Massachusetts AG Wins Injunction, Right to Review Foreclosures

By PAUL JACKSON
November 14, 2008

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Servicing 9,700 Option One Mortgage Corp.-originated mortgages in Massachusetts just got a little bit more difficult for American Home Mortgage Servicing Inc., after the state’s AG won a preliminary injunction against the now-defunct lender on Wednesday afternoon.

The order, granted Monday by Judge Ralph D. Gants in Suffolk Superior Court, prohibits Option One and AHMSI from initiating or advancing foreclosures on mortgage loans that are considered “presumptively unfair” under the terms of the court order. AHMSI must instead give the state AG’s office at least 30 days notice before it intends to foreclose on any such loan, and, if the Attorney General objects, obtain approval from the court before foreclosing on a loan.

American Home purchased Option One’s servicing platform from H&R Block, Inc. (HRB: 17.68 -5.91%) earlier this year.

“We are pleased by the court’s decision and the relief it will afford, both to homeowners and to the communities suffering from the effects of Option One’s loans,” said Attorney General Martha Coakley. “The economic crisis continues to worsen, and predatory subprime lending is at the core of the problem. We intend to hold accountable those who engaged in such unlawful lending conduct.”

Rhetoric aside, HousingWire spoke to a few attorneys that work in the default management space, and may represent AHMSI, who said the court order would likely to little to change the amount of time it takes to process a foreclosure in the state. “Really this just means that when a filing is on its way, a process has to be put in place to notify the AG’s office,” said one attorney, who asked not to be named in this story. “The question is how many loans are ‘presumptively unfair,’ and how many foreclosures the state AG actually intends to object to.”

Another source mused that Coakley’s office was opening itself up to potential investor lawsuits for blocking a valid foreclosure, for damages and incurred carry costs should the state AG’s office decide not to allow a foreclosure to take place.

Coakley’s office filed suit against Option One and its parent company, H&R Block, Inc., back in June 2008, alleging that they originated thousands of risky subprime loans in Massachusetts, “with reckless disregard as to whether borrowers would be able to afford their loan payments.”

According to the complaint, filed in Suffolk Superior Court, Option One and H&R Block “engaged in unfair and deceptive conduct on a broad scale by selling extremely risky loan products to Massachusetts consumers that the companies knew or should have known were destined to fail.” The complaint also alleges that the companies discriminated against black and Latino borrowers in the state, by charging them higher points and fees to close their loans than similarly situated white borrowers and by targeting black and Latino consumers with marketing that pushed the sale of predatory loan products.

Under the terms of the injunction, if mortgages meet certain characteristics which make them “presumptively unfair,” AHMSI may not foreclose upon such loans without giving the AG 45 days review the case and object. If the Attorney General’s Office objects, the parties have 15 days to resolve their differences and discuss alternatives, such as an affordable loan modification. If they cannot reach a mutually agreeable resolution in this time period, then AHMSI may only proceed with a foreclosure if it receives court approval.

Should the state AG’s office object to a fair number of loans, it could add to the amount of time it takes to process a foreclosure, driving up costs for insurers and investors.

This is the second lawsuit that the Coakley’s office has filed against subprime and Alt-A lenders in the state. In Oct. 2007, the AG filed a similar case against California-based Fremont General and Fremont Investment and Loan, and subsequently obtained an injunction that prohibits Fremont from initiating or advancing foreclosures on presumptively unfair loans.

Write to Paul Jackson at paul.jackson@housingwire.com.

Massachusetts AG Wins Injunction, Right to Review Foreclosures : HousingWire || financial news for the mortgage market
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Good to see someone is advocating for the little folks.

My sitch is with Option One/Deutsche/AHMSI, but I'm in Kentucky. Hopefully I can put the information to good use in my next suits/pleadings.

Glenn
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This seems like they are looking out for the homeowner at first read.
However they are only promising to review the loan and offer a modification.
Anyone who has been tracking the servicers way of doing business for several years on this board knows what happens after the loan is modified.

The note is then sold as a scratch and dent loan (because it was modified) to a new investor who transfers the servicing rights to a special servicer. At the same time the new investor executes a series of transactions related to the CDO's similar to puts on options which allow them to profit when the price drops. 

The only goal of the special servicer is foreclosure so the investors can collect the loan and investment insurance and servicers their excessive illegal fees. 

By The Way many times the new investor is the servicer. They are usually different corporate entities of a conglomerate. So even if the borrower has a way to pay the loan the servicers use the well documented tricks shared on this board to refuse or misaccount payments while adding fees many of them illegal to the loan.

The subprime loans and prime loans if they have been modified are doomed to eventual foreclosure as we have seen in many cases.
 
They tout freddie and fannie as the place to put these modified notes when they are engaged in this type of conduct and securities Ponzi fraud in their business also.

In the end we get it in the end.

The AG has not acted in the true interest of the consumers-only the banks to whom they are beholden due to their political bribes (contributions).

Big Barney also verbally MAKES IT LOOK LIKE HE IS LOOKING OUT FOR US BUT HE AIDS THE THIEVES WITH THE BAILOUT AND COMPLAINS NOW THAT THE JUNK BONDS ARE APPARENTLY NOT GOING TO BE BOUGHT BY THE GOV.

So I have not seen the AG's stop the chain of fraud because they legally cannot yet stop the federal banks and their servicing operations due to the power of the federal laws due to preemption. The AG's appear to be acting for consumers but they cannot offer anything of real value to the consumer except a modification which ultimately benefits the servicers as they foreclose for profit for the investors.

So who is there to really help the consumers?
Are we on our own?

Is it in the interests of the AG's to stop this and hold them accountable as they say or is it all about the gold he who has the gold makes the rules.
 
We cannot force the AG's to modify the process of loan origination and securitization to make it safe for consumers. There is no way for them to do this since it is controlled by the banks and investment houses which own the federal government. If you need proof of this see the billion dollar bailout.

If a loan is securitized it is risky for the consumer. The only safe loan for the consumer is one which is not securitized.

So where can consumers find a home loan which is not securitized.
Local banks and credit unions which the AG's can regulate locally.

So if the AG's really want to act in consumers interests they would make securitized loans illegal since there is presently no way to stop the foreclosure for profit. This would transfer the loan volume (modifed or not) to the local banks away from the federal ones and bring stability to the local housing markets as the foreclosures will stop.  

What about the prior illegal foreclosure victims who got no bailout will they get some form of recompensation outside of the slow to act civil courts? What can the AG's, if they really are to act in the consumer's interest, do for the victims?

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