Mortgage Daily

Published On: March 20, 2003
Fairbanks Under Fire by Senator, Consumers

Utah company draws flurry of complaints, lawsuits

March 20, 2003

By PATRICK CROWLEY

A Utah-based company that is the nation’s leading servicer of subprime mortgages has emerged as the target of dozens of lawsuits, hundreds of complaints and a possible criminal probe by federal authorities.

Fairbanks Capital Corp. of Salt Lake City has said little about allegations it has charged excess fees, misapplied mortgage payments and inappropriately threatened customers with foreclosures by using inaccurate or false information.

The chatter about the company has grown so loud that a United States Senator has gotten involved.

In a letter dated March 12 Sen. Barbara A. Mikulski, D-Md., asked the U.S. Department of Housing and Urban Development (HUD) Inspector General Kenneth Donohue to “launch an investigation into the business practices of Fairbanks Capital Corporation.”

“There are hundreds of complaints about this company from homebuyers all over the country, alleging that Fairbanks is scamming them out of thousands of dollars,” Mikulski wrote to HUD.

“I believe that we must be on the side of families, and work to root out scams that ruin lives and communities,” she said.

Specifically, Mikulski asked Donohue and HUD to conduct a “thorough criminal investigation into Fairbanks” and “share information on the investigation with other federal agencies.”

“If Fairbanks is found to be in violation of the law, they should be prosecuted and stopped from preying on more families,” Mikulski said.

Asked to respond a Fairbanks spokeswoman emailed a statement from company president Bill Garland.

“It is Fairbanks policy and practice to treat all borrowers fairly, and consistent with its legal obligations,” Garland said in the email. “Fairbanks will certainly seek to address directly with Senator Mikulski and her staff any concerns the Senator may have about Fairbanks’ servicing practices.”

WBAL-TV in Baltimore reported March 10 that Fairbanks halted foreclosures in Maryland following complaints by consumers and pressure from state regulators.

On its corporate Internet Web site Fairbanks indicates it has the “highest rating available” from credit rating services Standard & Poor’s (S&P)Fitch and Moody’s and is an “approved” servicer, special servicer and approved subservicer by Freddie MacFannie Mae and HUD.

Yesterday, S&P placed Fairbanks’ residential subprime and residential special servicer rankings on CreditWatch with negative implications, reflecting “increased regulatory scrutiny over the company’s servicing practices.”

“This scrutiny includes a recent meeting between Fairbanks’ management and Maryland regulators, which was held to address concerns voiced by Fairbanks’ borrowers residing in Maryland,” S&P said in its announcement. “Additionally, at the request of U.S. Senator Barbara Milkulski, investigators from (HUD) have met with Fairbanks’ borrowers in the Maryland area to consider the possibility of launching a wider probe.”

A class action lawsuit filed in Los Angeles Superior Court by the law firm of Lieff, Cabraser, Heimann & Bernstein accuses Fairbanks of a host of improprieties. Among the allegations are that Fairbanks misapplied mortgage payments, failed to credit mortgage payments in a timely fashion and charged unlawful late fees, according to a statement from the firm.

“Fairbanks has engaged in a scheme by which it levies unwarranted and unlawful late fees on its customers and uses a customer’s lateness to improperly assess other fees,” the firm said.

Fairbanks is also the focus of several Internet Web sites and bulletin boards filled with consumer complaints, unfavorable media coverage and information about legal action the company faces.

One of the sites — www.conti-fairbanks.com — lists more than 40 lawsuits filed against Fairbanks in 16 states and the District of Columbia.

In a separate email response sent by Fairbanks spokeswoman Louise Filkins, she said any consumers with complaints should contact the company’s customer service department.

“We are aware of certain Web sites that have sprung up with a focus on Fairbanks and we are respectful of others’ First Amendment rights,” Filkins wrote in the email. “Conveying unsubstantiated information does not serve anyone’s interest.”


Patrick Crowley is currently a political reporter and columnist for The Cincinnati Enquirer and was formerly a business writer.

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