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Fremont Investment's Mortgage Foreclosure Injunction Not Retroactive

A Massachusetts Superior Court judge has held that the 2008 injunction against foreclosure of certain Fremont Investment & Loan ("Fremont") mortgages did not apply to Fremont mortgages assigned to third parties prior to the entry of the injunction.  Moronta v. Nationstar Mortgage, LLC et al., 32 Mass. L. Rptr. No. 14, 339 (November 24, 2014) (Connors, J.).

Moronta refinanced his home in January 2007 with Fremont.  On March 7, 2007, Fremont signed a consent agreement with the Federal Deposit Insurance Corporation on March 7, 2007, after which Fremont transferred its interest in both Moronta's promissory notes and mortgages to Nationstar Mortgage, LLC ("Nationstar") in March and July, 2007.  On February 28, 2008, the Massachusetts Superior Court entered an injunction requiring Fremont to obtain authorization from the Court or the Attorney General prior to foreclosing on any mortgages Fremont held.  Commonwealth v. Fremont Inv. & Loan, 23 Mass. L. Rptr. 567) (Mass.Super.Ct. Feb. 25, 2008).  On March 31, 2008, the Court amended the preliminary injunction to require that any purchaser of a Fremont loan accept the terms of the Fremont injunction.

Moronta asserted that the amendment to the injunction required that all subsequent purchasers of Fremont mortgages originated between 2004 and 2007, the years covered by the original injunction, be bound by the Fremont injunction.  The Court disagreed.  "The Fremont injunction applied to all loans that Fremont itself then held.  It did not have retroactive effect."  Moronta, 32 Mass. L. Rptr. No. 14 at 341.  The amendment was not intended to add loans previously transferred by Fremont to the list of loans covered by the Fremont injunction, but was instead meant to "prevent Fremont from circumventing its terms by assigning its loans to a third party in futuro."  Id.

Moronta's further claim that the loan in question violated Mass. Gen. L. c. 93A as presumptively unfair under the test announced in Fremont fared no better.  The Court held that for purposes of the Fremont test, under which loans that meet four factors are presumed unfair, an appraisal by a third-party appraiser licensed in Massachusetts cannot be contested on summary judgment by reference to property values from Zillow.com or the assessor's office of the municipality in which the property is located.  While those sources might be of use in some circumstances, for purposes of summary judgment, they are "fundamentally unreliable in establishing the property's value."  Id. at 342.  In the face of an appraisal by a licensed, third party appraiser, such evidence cannot create a genuine issue of material fact.

Purchasers of Fremont mortgages prior to the March 2008 amendment to the Fremont injunction can take comfort in this holding that they are not required to obtain advance approval in the event of a foreclosure.

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