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AFFIL Board Member Illuminates "Toxic" Mortgage Lending Case

August 7, 2009

AFFIL Board member Kathleen Engel is moving from Cleveland to Boston, where she will join the faculty at Suffolk University Law School – just a few blocks from our offices.  She is making the actual move next week and won’t start teaching until September, but she’s already appearing in our local news as a Suffolk professor with expertise on predatory mortgage lending.

The Boston Globe quotes Engel on the national importance of a pair lawsuits filed in federal district court in Massachusetts.  Boston attorney Gary Klein is seeking to hold Bank of America and Wells Fargo responsible for “toxic” mortgage loans made to Massachusetts borrowers – loans that the lenders knew the borrowers would be unable to repay.  (The loans were originally made by Countrywide Home Loans and World Savings Bank, lenders subsequently acquired by BofA and Wells Fargo.)

The claims are based, in part, on the Massachusetts Unfair and Deceptive Practices Act, the same law that Massachusetts Attorney General Martha Coakley used successfully against failed subprime lender Fremont Investment & Loan.  In that case, a unanimous decision by the state’s Supreme Judicial Court last December strongly affirmed a lower-court ruling that thousands of Fremont’s loans were “presumptively unfair” because they had “characteristics that made it almost certain the borrower would not be able to make the necessary loan payments, leading to default and then foreclosure.”

In making those loans, Fremont considered the borrowers’ ability to make payments only during a three-year initial period, even though they knew that after that time the monthly payments would jump sharply upwards to a level that the borrowers could not possibly repay.  The only way that a borrower could escape foreclosure was under the unrealistic assumption that housing prices would continue to increase rapidly; in that case the borrower could refinance into another unfair mortgage with deceptively low initial payments – generating a second round of hefty fees for Fremont.

Professor Engel is right that if these cases are successful – as they should, given the powerful evidence and arguments that are offered – they “will be a model throughout the country.”  Many other predatory lenders have cause to be worried.

AFFIL Board Member Illuminates “Toxic” Mortgage Lending Case

Image: of Kathleen, from our board page

AFFIL Board member Kathleen Engel is moving from Cleveland to Boston, where she will join the faculty at Suffolk University Law School – just a few blocks from our offices. She is making the actual move next week and won’t start teaching until September, but she’s already appearing in our local news as a Suffolk professor with expertise on predatory mortgage lending.

Link “Kathleen Engel” here to [newly updated] affil board page

The Boston Globe quotes Engel on the national importance of a pair lawsuits filed in federal district court in Massachusetts. Boston attorney Gary Klein is seeking to hold Bank of America and Wells Fargo responsible for “toxic” mortgage loans made to Massachusetts borrowers – loans that the lenders knew the borrowers would be unable to repay. (The loans were originally made by Countrywide Home Loans and World Savings Bank, lenders subsequently acquired by BofA and Wells Fargo.)

URL FOR GLOBE STORY:

http://www.boston.com/business/articles/2009/08/05/attorney_sues_lenders_says_they_created_toxic_products/

The claims are based, in part, on the Massachusetts Unfair and Deceptive Practices Act, the same law that Massachusetts Attorney General Martha Coakley used successfully against failed subprime lender Fremont Investment & Loan. In that case, a unanimous decision by the state’s Supreme Judicial Court last December strongly affirmed a lower-court ruling that thousands of Fremont’s loans were “presumptively unfair” because they had “characteristics that made it almost certain the borrower would not be able to make the necessary loan payments, leading to default and then foreclosure.”

Coakley press release: [link to “used successfully”

http://www.mass.gov/?pageID=cagopressrelease&L=1&L0=Home&sid=Cago&b=pressrelease&f=2008_12_09_sjc_fremont&csid=Cago

SJC decision: http://www.mass.gov/Cago/docs/press/2008_12_09_sjc_fremont.pdf

In making those loans, Fremont considered the borrowers’ ability to make payments only during a three-year initial period, even though they knew that after that time the monthly payments would jump sharply upwards to a level that the borrowers could not possibly repay. The only way that a borrower could escape foreclosure was under the unrealistic assumption that housing prices would continue to increase rapidly; in that case the borrower could refinance into another unfair mortgage with deceptively low initial payments – generating a second round of hefty fees for Fremont.

Professor Engel is right that if these cases are successful – as they should, given the powerful evidence and arguments that are offered – they “will be a model throughout the country.” Many other predatory lenders have cause to be worried.

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3 Comments
  1. Kim Powers permalink
    October 1, 2009 7:19 am

    Yeah right,shakin in their boots, no doubt.But my home of 32 years will be sold by then and it will be over for me. I fought the good fight,but $5,000. just to start and MAYBE make it to the appeal stage and what? Worried lenders? Are you kidding? Who am I, no one and everyone. Military med corps, top 3% grad, took care of last full bird col till death, married veteran,went to college,27 years in state gov.,bought 1st modest home in low rent dist at 20, paid off in 01.Then husband, disabled vet, educated elec engineer, fed emp. died. Then it goes like this. Retirement & life ins. to Putnum,ok till I got sick, broker, tax advisor was none of that, pulled money out to pay off house, surprise.I paid her BUT,then IRS etc. etc. Retired 100% disabled most of nest egg stolen (class action check $15.00), car wreck, auto ins. delayed payment 9 mo. & car rental charge pre-approved,then UNapproved, next collector abuse screaming I’m calling your lender” I called them, SO nice, but of course TONS of equity, 30 day extention. But of course only if you miss a pmnt. (never did) OK, duh, I guess. Fax, lose, refax, delay, blah, blah, then “Your in foreclosure, too late, house gone, it’s over!” Not true, but I didn’t know. (not behind mind you)OMG!Escape from bad guys (and 6% 30yr fixed, a must for disabled widows),so I shopped, compared, and lucky me.Dodged that bullet.New loan,heard of the Pony co., this broker could work magic, blah, blah.Signed with New Century, I guess, 3 flips (total bait & switch, forgery, the works) Used my 27 years as IT & reasearch analyst to learn what was happening.Of course including paying LMG to mod ‘ocwen’ who said delinquent folks first, company paid said, no prob. they don’t process payments during mod. Well, thanks J. Brown, put em’ in prison,wish it actually helped me. Anyway, paid more to attorney, eight months later,(loan mod ya know) Ocwen letter. NOPE, no mod for you. Called them for 180.Resubmit on different form. Of course, the underwater loan is now over $15,0000 from where I started.What else did I learn, aside from forced doubled haz. ins, PMI & Radian, (plus Deutsche gets $$ from past handshake). Guess what, over valued appraisal (new ruined credit), and something about foreclosure payment at full amount plus add ons. OHHHHH. I see why bank mafia did XX mods, (big question, for how long),but on the homeless front, not that anyone’s asking, how many exactly? 0, none, zilch, nine, honestly,another bank CEO dripping with sincere integrity.While polite ‘hope we do better’ and ‘ratchet up the numbers’ doublespeak is actually on TV….still. My life is ruined and I /we know why. The good news is, after my home I lived, worked and sacrificed my entire adult life goes back to the bank with most empty houses in formally nice familly neighorhood the game can start again. Yeah, whats a lifetime, no biggie. Here in Rncho Cordova, CA you are/have created blight and while I don’t want to point fingers,(initials D.M.,are u actually ON the comm)Thanks for ignoring my emails,until the invitations on health care reform) Uh,nice story line. Has my attention, since post tramatic stress, degen disc, stenosis, fibromyalgia, and cancer expenses were saved for paying ARM that now eats entire check.At least I don’t have to worry about the handicap access fund. What is the good news? If I could find a place, pay to get there, pack up my life without family, funds, or friends, well; besides knowing my gov is making sure to get those bad guys, once we figure it out and all, maybe I’ll be one of the lucky getting affordable low rent housing. After ‘distressed’ props.purchased with fed funds neighborhood restoration, I CAN RENT THE HOME I USED TO OWN!!! I called the suicide hotline today and they gave me all the reg agens for filing my complaints. Is there an agency for I hate greed driven mafia sociopaths who should burn in hell. Since I worked hard, did the right thing, lived an honest life. My golden rule, ‘karma’ based values have reduced me to a single cell non entity. To close, what can I say? “YOU ARE VERY BAD MAN”….but at least ya got all da money and after all isn’t that what life’s ALL about???

  2. March 22, 2010 8:05 am

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