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Cape couple wins a round against subprime lender

Judge tells firm it cannot foreclose until suit resolved

A Massachusetts judge has ordered Ameriquest Mortgage Co. to halt a $715 monthly increase in a Cape Cod couple's March payment and to refrain from foreclosing on their property until a lawsuit over the mortgage is resolved.

Ameriquest is one of the nation's largest writers of "subprime" loans, which charge higher interest rates because they lend to borrowers who often have poor credit ratings or large debts. A study by the Federal Reserve Bank of Boston demonstrated that borrowers who fall behind on their subprime loans are driving foreclosure rates in Massachusetts to record levels.

Thomas Hilchey, a self-employed home builder who filed the lawsuit last month, is middle class and isn't a typical subprime borrower, according to his lawsuit and his Stoughton attorney, Bruce Bierhans.

"He has paid all his bills, including his mortgage, in a timely fashion, and now finds himself in a loan he can't pay," Bierhans said.

Ameriquest declined to comment on the case.

Hilchey and fiancee Robin Crevier, in the suit in Suffolk Superior Court, said Ameriquest's loan salesman did not provide the proper documents and disclosures about their loan, as required under state and federal laws. The payment increase "has this middle-class individual facing the specter of foreclosure," the suit said.

The couple's loan started with a "teaser rate," set for two years, of 5.75 percent, resulting in monthly payments of $1,692, the suit said; after a 2005 rate hike, to 7.75 percent, payments rose to $2,035. On March 1, the rate was scheduled to jump to 9.75 percent, boosting payments to about $2,750, documents said.

While the couple agreed to an adjustable rate mortgage to refinance their Harwich home and knew the interest rate could rise in two years, they were not told how high future rates and payments could go, Bierhans said.

Boston attorney Gary Klein said a lawsuit is virtually the only method available to Massachusetts homeowners to halt foreclosure proceedings. Massachusetts law, unlike a majority of states, does not require courts to monitor the process, said Klein, who represents dozens of borrowers in class-action suits against subprime lenders. He said he has about 40 such injunctions.

In Massachusetts "foreclosure is an entirely private proceeding" between the borrower and lender, he said.

In a Feb. 21 decision, Superior Court Judge Allan van Gestel said the rate on Hilchey and Crevier's loan would remain at its current rate until the lawsuit is resolved.

Kimberly Blanton can be reached at blanton@globe.com.

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