The town of West Tisbury has filed a lawsuit against a mainland subprime mortgage company that loaned more than half a million dollars to an affordable homesite owner in town who had no ability to repay — and then foreclosed on the property.

The lawsuit charges Saxon Mortgage Services Inc., a Texas-based lending institution, and Fremont Investment and Loan of southern California, with unfair, deceptive and predatory lending practices.

Filed in Dukes County Superior Court on Dec. 20 by West Tisbury town counsel Ronald H. Rappaport, the complaint seeks to reestablish a set of protective covenants that run with the property to ensure that it will remain affordable in perpetuity. The complaint also includes a lis pendens (which is Latin for litigation pending), intended to warn potential buyers of the legal problems surrounding the property, and asks for an injunction barring the sale of the lot before the covenants are reinstated.

At the center of this legal storm is an affordable homesite located in the Roth Rogers subdivision on Scrubby Neck Road off the Edgartown-West Tisbury Road. The former property owner is Shawn R. Cote, who has since lost his home to foreclosure.

Mr. Cote bought the lot in August of 2003 and took out a mortgage with Wells Fargo Home Mortgage Inc. for $252,100, the town complaint shows.

In March of 2006 Mr. Cote took out an adjustable rate, 30-year mortgage with Mortgage Electronic Registration Systems Inc., in connection with a loan from Fremont, for just over $581,000.

The town court complaint shows that Mr. Cote’s monthly payments were more than $4,000, well in excess of his monthly income.

The town claims that Fremont loaned Mr. Cote more than $580,000 on a lot that was permanently restricted for affordable housing purposes, knowing that he had no ability to repay the loan based on his income and credit history, and that he could not sell the lot to satisfy the obligation due to the restrictive covenants.

“Fremont (and thereby Saxon) knew, or should have known, that Cote’s loan, absent prompt refinancing, would fail and result in foreclosure,” the complaint states, adding: “Due to Fremont’s unlawful predatory conduct as the originator of this loan, Cote lost his home and his savings and the town, absent judicial intervention, may permanently lose a lot which was dedicated to its limited pool of affordable housing stock.”

Saxon initiated foreclosure on the property in February of 2007.

The restrictive covenants were wiped out by the mortgage foreclosure; if the court does not reinstate them, Saxon will be free to sell the property at a significant profit.

“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 [restored to its affordable status],” the complaint states, adding:

“If the lot can be sold unrestricted, Fremont and Saxon will receive an unjust windfall for their fraudulent conduct.”

Last year the Federal Deposit Insurance Corporation issued an order against Fremont and its affiliates compelling them to cease and desist from subprime lending practices.

“The FDIC determined that Fremont had engaged in unsafe and unsound business practices and had committed violations of law . . . .” the town complaint states.

The West Tisbury selectmen noted at their regular meeting this week that the complaint had been filed.

“We want the parcel to be affordable housing again. We lost it at this point due to predatory lending. We want to reclaim it,” said selectman Dianne E. Powers, who signed an affidavit that accompanied the complaint.