## Facts

- United Companies Lending Corporation was a licensed Massachusetts mortgage lender focused on subprime first-lien residential loans, often used for debt consolidation, home improvement, or major purchases.
- In the subprime market, lenders commonly price loans by borrower risk classification, with no single standard method comparable to the prime market.
- Subprime origination generally involved charging about five points (5% of the loan amount) as an origination fee.
- United adopted an internal policy of charging ten points on its Massachusetts subprime loans and commonly used adjustable-rate terms, asserting the pricing was necessary to cover higher default risk, origination/servicing costs, and capital costs.
- Daisy F. Sargeant obtained a United loan through a broker; the broker did not fully or accurately disclose the total points and fees required to obtain the loan.
- After Sargeant fell behind on payments, United initiated foreclosure proceedings.
- The dispute centered on whether United’s uniform ten-point fee policy and the manner of fee disclosure were unfair or deceptive under Massachusetts consumer-protection law and regulations governing mortgage lending.
- The case proceeded in federal court on diversity jurisdiction, after removal from state court, and was submitted as a “case stated” on stipulated material facts for resolution as a matter of law.

## Issues

1. Whether a lender’s uniform policy of charging ten points on subprime residential mortgages, when industry practice was roughly five points, “significantly deviated from industry-wide standards” or was “otherwise unconscionable” under Massachusetts mortgage-lending regulations implementing Mass. Gen. Laws ch. 93A.
2. Whether incomplete or inaccurate disclosure of points and fees in connection with the loan transaction rendered the practice unfair or deceptive, including where disclosures were made through a broker.
3. Whether competitive market forces and borrowers’ ability to shop among lenders precluded a finding of unfairness or unconscionability under a regulated consumer-protection scheme.

## Decision

- The court entered judgment against United on the Chapter 93A consumer-protection theory presented.
- The court found United’s ten-point origination-fee policy significantly deviated from prevailing subprime industry standards.
- The court concluded United’s asserted cost-and-risk justifications did not, on the stipulated record, support doubling the typical origination fee.
- The court determined that, considering the transaction as a whole—including the high uniform fee and deficient fee disclosures—the practice was unfair or deceptive under the governing mortgage-lending regulations.
- The court rejected the argument that market competition alone insulated above-market pricing from regulation under Chapter 93A and its implementing mortgage rules.

## Legal Principles

- Under Massachusetts regulations implementing Mass. Gen. Laws ch. 93A for mortgage lending, loan terms may be unfair if they “significantly deviate from industry-wide standards” or are “otherwise unconscionable.”
- Regulatory unfairness analysis may rely on comparative, industry-based benchmarks and is not displaced by a pure market-forces test.
- A lender’s business justifications for above-market pricing must be supported by evidence sufficient to show the deviation is warranted under the regulatory standard.
- In assessing unfairness or unconscionability in consumer finance, courts may consider the totality of circumstances, including consumer vulnerability and the adequacy of fee and point disclosures.
- In a “case stated,” the court may draw reasonable inferences from stipulated facts and resolve liability as a matter of law.

## Conclusion

The court held that a subprime lender’s uniform ten-point origination-fee policy, combined with inadequate disclosure of the total fees and points, constituted an unfair or deceptive practice under Massachusetts Chapter 93A mortgage-lending regulations because the pricing significantly exceeded industry norms without sufficient justification and was unconscionable in context.


United Cos. Lending Corp. v. Sargeant, 20 F. Supp. 2d 192 (D. Mass. 1998)