|Subsidiary of Wall Street Giant Faces FTC Inquiry
FTC inquiring about EMC servicing practices
January 4, 2006
|The Federal Trade Commission has opened a probe into a Texas-based subprime servicer.Wall Street giant Bear Stearns Cos. disclosed in a regulatory filing that the FTC wants to know if subsidiary EMC Mortgage Corp. broke any consumer protection or lending laws.
The FTC has confirmed the investigation but has not commented on it or released any statements. Other than disclosing the investigation in a Dec. 30 regulatory filing with the Securities and Exchange Commission, neither Bear Stearns nor EMC is commenting.
But New York-based Bear Stearns acknowledged in the filing that it received a Civil Investigative Demand, or CID, from the FTC. The demand is similar to a subpoena in that it is used to retrieve documents and other information from a company.
“EMC Mortgage Corp. … has received a civil investigative demand from the (FTC) seeking documents and data relating to EMC Mortgage Corporation’s business and servicing practices,” Bear Stearns said in the filing.
The FTC wants the documents, the company said, “to determine whether there have been violations of certain consumer protection laws. EMC … is cooperating with the FTC’s inquiry.”
Irving, Texas-based EMC services more than $50 billion in first and second mortgages. According to Fitch Ratings, EMC is rated ‘RPS1’ for prime, Alt-A, and subprime products and rated ‘RSS1’ as a special servicer.
Those are the highest ratings available from Fitch.
But EMC has been the focus of some consumer complaints, according to a Florida law firm.
The Tampa Bay firm of class action specialists James, Hoyer, Newcomer and Smilijanich said it is “reviewing allegations that numerous EMC customers didn’t get credit for payments made, got billed for insurance they didn’t need and were unjustifiably threatened with foreclosure.”
The firm appears to be in the process of gathering members for potential legal action against the company.
“Some EMC customers are complaining about extra charges on their bills even though they paid on time,” the firm said in a posting on its Web site. “The extra charges can lead to threats of foreclosure and negative entries on credit reports. Consumers have also complained that EMC failed to properly credit them for payments made, and that EMC charged them for insurance they didn’t need.”
On its Web site EMC said it is a “mortgage banking company specializing in the acquisition, securitization, servicing, and disposition of residential loans.”
The company said it has grown from 10 employees in 1990 to more than 1,000.
Bear Stearns has operated since 1923 and, according to its corporate Web site, had total capital of $54.3 billion as of Nov. 30 and assets of $284.5 billion as of Aug. 31, making it one of the largest securities firms in the world.
So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...