West Tisbury sues to protect affordable housing covenant
By Michelle Ciccone
Published: June 23, 2011
The town of West Tisbury has filed suit in Dukes County Superior Court to wrest control of a house, built under the town's affordable housing guidelines, from a Texas-based mortgage lender that the town charges engaged in "unfair and deceptive business conduct."
The town's complaint was filed on Dec. 20, 2007, by the Edgartown law firm of Reynolds Rappaport and Kaplan against Saxon Mortgage Services Inc., under the Massachusetts Consumer Protection Act. The town asked the court to declare that the property formerly owned by Shawn R. Cote remains subject to restrictions that limit use to affordable housing.
The lawsuit states that Saxon Mortgage is the assignee of Fremont Investment and Loan, "a mortgage lender that has a demonstrated history of engaging in predatory lending." Mr. Cote obtained his mortgage from Fremont on March 17, 2006. The mortgage was handed off to Saxon after the Federal Deposit Insurance Corporation (FDIC) ordered Fremont on March 7, 2007 to "cease and desist from engaging in sub-prime mortgage lending." One of the FDIC's cited objections was Fremont's practice of "making loans without considering the borrower's ability to repay the loan according to its terms."
Mr. Cote built his large, contemporary log house in 2003, in a private subdivision on Rustling Oaks Road in West Tisbury, under a special permit allowed in the West Tisbury zoning bylaws. The property was designated as one of two affordable housing lots in the subdivision off Coffins Field Road.
By the time the property was forced into foreclosure and sold back to the mortgage holder at a Sept. 4 auction last year, the mortgage balance was $640,000, more than two and a half times the original mortgage of $252,000 obtained by Mr. Cote, and more than twice the maximum resale price allowed in the property deed's affordable housing covenant.
Even though the West Tisbury property had the covenant restrictions, efforts to save it proved difficult because of the high mortgage and the short notice before foreclosure.
Mr. Cote never informed the affordable housing committee or the town about the refinancing as required in the covenant, according to town officials.
The complaint filed by town counsel Ronald Rappaport and lawyer Michael Goldsmith charges that Fremont made a loan to Mr. Cote in excess of $580,000 knowing that "Mr. Cote had no ability to service or repay the debt based on his credit history, income which did not exceed $50,000 a year, and total asset portfolio; and could not sell or transfer the lot to satisfy his obligations due to the existence of the covenant, which limited the resale to other eligible affordable homesite recipients of similar financial status."
The complaint asks for "a judgment declaring that the covenant is valid and has survived Saxon's foreclosure," which would mean that the property remains in the affordable housing pool and can only be sold to an "eligible purchaser" as defined by the affordable guidelines at the time of purchase.
In addition, the complaint asked that any potential buyers of the property as a result of Saxon's foreclosure be notified that "the town, by its covenant, has claim of right to title in the lot," and further, that an injunction be issued that restricts Saxon from selling the lot at all, without "honoring the terms of the covenant."
The complaint argues that, "The town, its residents, and all those needing affordable housing in West Tisbury and on Martha's Vineyard, will be damaged if Cote's former property is not charged with having to comply with the requirements of zoning and the covenant."
Superior Court Justice Gary A. Nickerson issued an order dated Dec. 20, 2007, holding that the town does have a claim of a right to title or interest in the property.
At the West Tisbury selectmen's meeting last week, selectmen Glenn Hearn and Dianne Powers said that the town wants Mr. Cote's property back, to be included in West Tisbury's affordable housing pool.
