## Facts

- The Massachusetts Attorney General brought an enforcement action under Mass. Gen. Laws ch. 93A, § 2 against Fremont Investment & Loan and its parent, alleging unfair and deceptive acts or practices in subprime residential mortgage lending in Massachusetts.
- The challenged lending involved loans originated and serviced between 2004 and 2007 that later experienced high default and foreclosure risk.
- The Superior Court focused on a subset of loans combining four features that, taken together, made default and foreclosure “almost certain” at origination:
  - Adjustable-rate mortgages with low introductory rates followed by sharp interest-rate resets and payment shock.
  - High debt-to-income ratios calculated using only the introductory payment rather than the post-reset payment.
  - High loan-to-value ratios, often near 100%, leaving little or no borrower equity.
  - Significant or extended prepayment penalties limiting refinancing before or after the reset.

- The Attorney General sought a preliminary injunction restricting Fremont’s ability to foreclose on loans with the four-feature combination unless additional judicial or negotiated steps occurred.
- The Superior Court granted a preliminary injunction (later modified), finding a likelihood of success that the practices were unfair under ch. 93A.
- Fremont sought interlocutory relief; the Supreme Judicial Court (SJC) took direct appellate review.

## Issues

1. Whether originating home mortgage loans structured so that default and foreclosure were foreseeably “almost certain” can constitute an unfair act or practice under Mass. Gen. Laws ch. 93A, § 2 absent misrepresentation.
2. Whether treating loans with the four-feature combination as “presumptively unfair” improperly applied a new unfairness standard retroactively.
3. Whether references to the Predatory Home Loan Practices Act (Mass. Gen. Laws ch. 183C) were improper or whether regulatory compliance created an exemption under Mass. Gen. Laws ch. 93A, § 3.
4. Whether the preliminary injunction unduly interfered with foreclosure rights or was an appropriate equitable remedy in a ch. 93A enforcement action.

## Decision

- The SJC affirmed the preliminary injunction as modified.
- The SJC held the Attorney General showed a likelihood of success that originating loans with the four identified characteristics fell within established concepts of unfairness under ch. 93A at the time of origination.
- The SJC rejected the argument that the court created and applied a new retroactive unfairness standard.
- The SJC approved use of ch. 183C as informative evidence of legislative judgment about predatory lending, without treating it as the exclusive or controlling standard for ch. 93A liability.
- The SJC held Fremont failed to show its conduct was affirmatively “permitted” by law for purposes of the ch. 93A, § 3 exemption.
- The SJC concluded the injunction properly restricted, but did not eliminate, Fremont’s ability to foreclose and was suitably limited to loans meeting the “presumptively unfair” criteria.

## Legal Principles

- Conduct is “unfair” under Mass. Gen. Laws ch. 93A, § 2 when it falls within established concepts of unfairness, including practices that cause substantial consumer injury not offset by countervailing benefits, even without deception.
- A lender’s origination of loan products that it should recognize at the outset are not reasonably repayable, with predictable default and foreclosure, can support a finding of unfairness under ch. 93A.
- Courts may consider related statutes (including Mass. Gen. Laws ch. 183C) as relevant indicators of unacceptable lending practices when evaluating unfairness under ch. 93A, even if the statute does not directly govern the specific loans at issue.
- The ch. 93A, § 3 “permitted by law” exemption requires affirmative authorization by a regulatory scheme; the absence of an express prohibition does not create a safe harbor.
- A preliminary injunction in a ch. 93A enforcement action is appropriate where the plaintiff shows a likelihood of success and equitable balancing supports limited restraints designed to prevent ongoing consumer harm.

## Conclusion

The SJC upheld a tailored preliminary injunction limiting foreclosure on certain subprime loans, concluding the loan structure could be deemed unfair under ch. 93A because it made default and foreclosure foreseeably likely at origination, and rejecting defenses based on retroactivity, statutory displacement, and regulatory-permission safe harbors.


Commonwealth v. Fremont Inv. & Loan, 452 Mass. 733, 897 N.E.2d 548 (2008)