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Class Action Lawsuits to Enjoin Foreclosure: An Argument for Clinical Involvement |
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> | -- By JonathanWaisnor - 13 Apr 2010 |
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> | A Problem: Foreclosures Without Adequate Legal Advising |
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> | Massachuestts:
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Class Action Lawsuits to Enjoin Foreclosure: An Argument for Clinical Involvement |
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> | On March 2, 2008, the Attorney General of Massachusetts obtained a preliminary injunction against Fremont Mortgage Group, a mortgage lending firm based in California that held approximately 3,000 loans in the Commonwealth of Massachusetts. |
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< | -- By JonathanWaisnor - 13 Apr 2010 |
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> | This action (Commonwealth v. Fremont) was brought under the Massachusetts Predatory Loan Practices Act and the state’s general consumer protection statute (Mass Gen Laws 93A). |
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> | The injunction requires Fremont, or any company that purchased a loan from Fremont, to submit these loans for review to the Attorney General's office before foreclosure. |
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< | The Fremont Case |
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> | Judicial bypass will only be granted on a case by case basis, and the cost to Fremont to have an individual case reviewed is so great that one practical effect of the law is a de facto moratorium on foreclosures that keeps 2200 people in their homes for the foreseeable future or allows them to renegotiate the terms of their mortgages on very favorable terms. |
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< | On March 2, 2008, the Attorney General of Massachusetts obtained a preliminary injunction against Fremont Mortgage Group, a mortgage lending firm based in California that held approximately 3,000 loans in the Commonwealth of Massachusetts. This action (Commonwealth v. Fremont) was brought under the Massachusetts Predatory Loan Practices Act and the state’s general consumer protection statute (Mass Gen Laws 93A). The injunction requires Fremont, or any company that purchased a loan from Fremont, to submit these loans for review to the Attorney General's office before foreclosure. Judicial bypass will only be granted on a case by case basis, and the cost to Fremont to have an individual case reviewed is so great that one practical effect of the law is a de facto moratorium on foreclosures that keeps 2200 people in their homes for the foreseeable future or allows them to renegotiate the terms of their mortgages on very favorable terms. Investors and mortgage lenders in the Commonwealth and all over the country are bracing for more lawsuits, afraid that other state governments may try to follow the Massachusetts precedent. |
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> | Investors and mortgage lenders in the Commonwealth and all over the country are bracing for more lawsuits, afraid that other state governments may try to follow the Massachusetts precedent. |
| | What These Suits Can Do For Homeowners |
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< | Lawsuits against mortgage lenders and banks are on the rise, but still the number of plaintiffs is not even close to the number of people who could possibly have a cause of action against a mortgage lender like Fremont. Often the plaintiffs ask for money damages, but also for renegotiation of the terms, injunctions stopping foreclosure, or striking of particularly unconscionable provisions. The cases can take years to resolve, but if a preliminary injunction is granted, the plaintiffs can begin to see immediate benefit in being able to stay in their homes, at least temporarily. Often the lender will simply settle or renegotiate to avoid the costs of protracted litigation. Use of these lawsuits can radically shift the balance of power between an individual borrower and his credit holder. As we saw in Fremont, breaking up the mortgage and selling it off to others is no defense to an injunction. |
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> | Lawsuits against mortgage lenders and banks are on the rise, but still the number of plaintiffs is not even close to the number of people who could possibly have a cause of action against a mortgage lender like Fremont.
Often the plaintiffs ask for money damages, but also for renegotiation of the terms, injunctions stopping foreclosure, or striking of particularly unconscionable provisions.
The cases can take years to resolve, but if a preliminary injunction is granted, the plaintiffs can begin to see immediate benefit in being able to stay in their homes, at least temporarily. Often the lender will simply settle or renegotiate to avoid the costs of protracted litigation. Use of these lawsuits can radically shift the balance of power between an individual borrower and his credit holder. As we saw in Fremont, breaking up the mortgage and selling it off to others is no defense to an injunction. |
| | The benefit from a preliminary injunction to a homeowner is twofold: first, even if the suit is ultimately defeated and the foreclosure recommenced, the owner will have bought time to find a new job, secure new living accommodations, or simply blunt the effect of such a massive life change on his family. Second: it puts pressure on the lender to settle and renegotiate the terms of the lease, as long as the money gained from renegotiating is greater than the sale of the house minus the cost of fighting the suit.
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< | To bring one of these suits, a plaintiff would need an applicable consumer protection statute and a lawyer willing to take the case. Although the Massachusetts Predatory Loan Practices Act is particularly plaintiff-friendly, other states have similar statutes that provide for causes of action and equitable relief against predatory lenders. In New York, Banking Law 6-l has provided a cause of action for predatory lending (DLJ Mortgage v. Smith). Under an adequate consumer protection statute, the plaintiff would need a lawyer willing to take the case and see it through to the end. |
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> | To bring one of these suits, a plaintiff would need an applicable consumer protection statute and a lawyer willing to take the case.
Although the Massachusetts Predatory Loan Practices Act is particularly plaintiff-friendly, other states have similar statutes that provide for causes of action and equitable relief against predatory lenders.
In New York, Banking Law 6-l has provided a cause of action for predatory lending (DLJ Mortgage v. Smith). Under an adequate consumer protection statute, the plaintiff would need a lawyer willing to take the case and see it through to the end. |
| | Getting Law Students Involved |