The Massachusetts Supreme Judicial Court upheld a ruling by a superior court against the San Bernadino, California-based Fremont Investment & Loan, now called Fremont Reorganizing Corporation, that prohibits the lender, without court approval, from foreclosing on certain loans the courts considered unfair, in a unanimous decision reached earlier this month.
The original ruling defined the unfair loans as those with:

- The loan is an adjustable rate loan with an introductory period of three years or less – The loan has an introductory or “teaser” rate for the initial period that is at least 3% below the “fully indexed rate” – The borrower has a debt to income ratio that would have exceeded 50% had Fremont’s underwriters measured the debt at the “fully indexed rate” – The loan has a loan to value ratio of 100% or a substantial prepayment penalty or a prepayment penalty that extended beyond the prepayment penalty period
Fremont must provide the state attorney general with advance notice of a foreclosure sale, and if the loan meets the specified criteria, must exhaust all opportunities to work the loan out with the borrower, and if it can’t be resolved, obtain court approval to foreclose.
In the original injunction, the Superior Court ruled the “spirit of this decision is simply that Fremont, having helped borrowers get into this mess, now must take reasonable steps to help them get out.”
In its unanimous decision, issued by Associate Justice Margot Botsford, the Supreme Judicial Court reiterated the emphasis on home retention and said “that Fremont explore alternatives to foreclosure in the first instance.”