Mass. highest court to weigh in on racial bias in predatory home loans

The Supreme Judicial Court, the highest court in Massachusetts, holds oral arguments for cases on appeal during the first week of each month from September through May. Daniel Medwed, GBH News legal analyst and Northeastern University law professor, joined host Henry Santoro on Morning Edition to discuss highlights from this month’s docket. This transcript has been edited for clarity and length.

Henry Santoro: So let me ask you, what caught your eye in this week's oral argument calendar?

Daniel Medwed: So as always, there are lots of intriguing cases on the SJC docket. The SJC has a lot of leeway in selecting its cases, so it often plucks cases that involve novel legal issues, or at least are matters of statewide significance.

The one that really piqued my curiosity this week is on the argument calendar for Friday, and it concerns the subprime lending debacle of the 2000s. We'll go back in time for a moment. And as many folks know, a subprime loan is a loan in excess of the prime interest rate. And historically, they've been extended to people with low credit scores who are statistically somewhat likely to default on their loans. Back in 2004, Massachusetts tried to do something about this to stem the tide of some of these predatory lending practices by passing a law called the Predatory Home Loan Practices Act. One of the practices, of course, that it tried to stop related to racial bias — preying upon vulnerable BIPOC communities in these practices. I saw some data, Henry, from a 2011 study that indicated that back then, 6.8% of the overall loans went to white borrowers age 50 and up, whereas a whopping 21.8% went to Black borrowers in that age group.

So this appeal really concerns the rights and remedies available under that 2004 law, as well as a really important Massachusetts civil remedy known as Chapter 93A. And the question is whether you can raise your defenses and claims after a foreclosure has occurred or whether you have to do it all beforehand.

Santoro: So this case takes us back to that horrible subprime lending chapter of our history. What happened in that case?

Medwed: A Black couple in Brockton, Tommy and Mary Morris, wanted to buy a home, so they took out two loans, one of which was quite sizable. It was about $287,000, and it had a fixed rate for two years. But then it had an ARM, an adjustable rate mortgage feature, which meant that the interest rate ballooned up. And soon the Morris's were unable to keep up with their payments, and they were underwater. By 2017, get this, Henry, that loan had a debt of more than $450,000 on it, on an original $287,000 loan. The bank foreclosed on the property and sold it off. Those are sort of the background facts.

Santoro: Right. And we should say that discrimination in real estate cases has been taken very, very seriously, not just here in Massachusetts, but in the entire country. That's a big, big issue. Daniel, what is the precise legal issue at stake in this Morris case? Is it whether this counts as a predatory loan or is it some something else?

Medwed: Well, interestingly, Henry, it's something else. The lower courts, both the housing court and the intermediate appeals court here in Massachusetts agreed that this loan was predatory. It deserved the label "predatory." But what they said was that the statute of limitations had passed, or otherwise the claims were time-barred because the Morris's should have raised them before that foreclosure sale.

So a lot of conversations about procedure may seem dry or arcane or technical, but I often like to say that procedure is the key that opens the courthouse door, that without procedural access, you don't have a chance at substantive justice. I think it'll be really interesting to watch this case unfold in the SJC.

Santoro: OK, so this is just one case. Are there any other cases on the docket?

Medwed: Again, a bunch of really interesting ones. Another one that I'm looking at, Henry, is actually on tap for tomorrow. It concerns the mask mandate under Gov. Baker's emergency order. Not so long ago, a business owner in Lynn refused to abide by the mask mandate, so the city of Lynn's Board of Health issued an injunction to shut down the business. The business owner’s defense was that she was following federal OSHA guidelines at the time, which didn't require a mask mandate.

So it's an interesting case dealing with the battle between federal and state authorities. It also is pretty procedural because the key legal question is whether the dispute is now moot because Gov. Baker has moved on from the emergency order specifically and new rules are in place. So again, another case that I think I want to watch.