If you or a loved one has recently been displaced by flooding, you may be eligible to file a Fremont Investment and Loan Forced Flood Coverage lawsuit. If so, you may be able to recover compensation for paying exorbitant flood insurance premiums. The banks may have received kickbacks for forcing borrowers to purchase flood insurance, as the cost was usually added to the mortgage balance or deducted from the homeowner’s home equity account.
Fremont paid a “yield spread premium” to the broker for placing the borrower into a higher interest rate bracket
As the delinquency rate in the mortgage industry rose, Fremont allegedly paid a “yield spread premium,” or higher interest rate, to the broker to place the borrower into a higher bracket. This practice was criticized by the FDIC, which charged the bank with unsound banking practices. It ordered Fremont to stop making ARM products to subprime borrowers, stop making loans with low introductory rates, and cease making loans with loan-to-value ratios near 100%.
Although the terms and conditions of Fremont’s loan to the borrower are unethical, the lender maintains that it paid the “yield spread premium” to the brokerage firm for placing the borrower into a higher rate bracket. The judge also concluded that the broker’s payment to Fremont amounted to an unfair practice under Massachusetts law.
The results are inconsistent, but overall, the costs are much higher for loans with higher costs than loans with lower costs. This is due to the heterogeneity of borrowers. In a perfect competition scenario, costs are the lowest, and profits are the highest. Brokers’ profits are positive, and the fees they charge borrowers reflect this profit margin. The results point to the fact that the mortgage industry is increasingly interested in QRM loans.
Fremont forced borrowers to purchase or maintain an excessive or second flood insurance policy
Some financial institutions are requiring borrowers to buy or maintain an excessive or second flood insurance policy. Fremont Investment and Loan is not one of these financial institutions, but many homeowners have complained about their forced flood insurance premiums. The company has not been identified by the government as having engaged in such practices. It is possible to pursue compensation from the lender for high flood insurance premiums. The cost of flood insurance was deducted from the home equity account or added to the mortgage balance.
Fremont’s ability to foreclose on loans with terms that in combination would lead predictably to the consequence of default and foreclosure
Although the decision is highly influential, it has several serious drawbacks. First, it involves risk. While the Attorney General is likely to be satisfied with this settlement, she faces the risk of a negative decision that could hamper future litigation or negotiations. Second, the case itself highlights the importance of recognizing that Fremont is not a model lender. The company made irresponsible loans with no regard for basic underwriting practices.
The alleged fraud and unfair lending practices of Fremont are particularly troubling. The firm did not require its borrowers to provide documentation of their incomes and expenses, despite the requirement to submit this information to obtain a mortgage. Instead, it implicitly told them that the loan application would be based on false information. In addition, Fremont was not held responsible for borrowers’ misunderstanding of the terms and conditions of the loans.
The agreement did not provide immediate relief from foreclosure. In fact, by 2007, twenty percent of Fremont’s loans were in default. It was also responsible for more foreclosures in Boston than any other lender. The Massachusetts Attorney General’s Office negotiated a Term Sheet Agreement with Fremont and required that the company give the applicant 90 days’ notice before initiating a foreclosure, providing time to object to the foreclosure.
