Mortgage Lender pays $10 Million to Settle Lawsuit

Bankrupt subprime lender Fremont General Corp agreed to pay $10 million to settle a lawsuit alleging unfair loan practices with the state of Massachusetts.

Defaults on subprime mortgages are blamed for the collapse of the real estate bubble that helped precipitate the U.S. financial crisis. Fremont was one of the largest U.S. subprime-mortgage lenders until U.S. regulators ordered it to stop making risky home loans in March 2007.

Fremont has also agreed to hold off on foreclosing on about 2,200 homes without certain protections for borrowers, Massachusetts Attorney General Martha Coakley said in a statement yesterday.

“The American dream of home ownership has turned into a nightmare for many borrowers because of predatory lending practices,” Coakley.

In a 2007 lawsuit, Coakley had accused California-based Fremont of engaging in predatory and unfair lending practices by making loans to individuals who could not afford them. Fremont denied wrongdoing.

The settlement comes on not more than a month after the $60 million deal to end litigation with Goldman Sachs Group Inc over a Massachusetts investigation into whether the investment bank’s subprime mortgage securitization business had encouraged unfair loans.

The state has also sued H&R Block Inc for what A.G. Coakley says are unfair practices making home loans to minorities.

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