Office of Financial and Insurance Services (OFIS) Commissioner Linda A. Watters today announced that consumers harmed by the mortgage servicing practices of the Fairbanks Capital Corp. (Fairbanks) should be receiving checks any day.

Fairbanks had allegedly been engaged in illegal predatory loan servicing practices such as failing to properly administer escrow accounts, illegally assessing fees for releasing borrowers from mortgages that were paid off, and improperly assessing fees on delinquent accounts.

Commissioner Watters said, “Predatory practices will not be tolerated in Michigan. Fairbanks attempted to overcharge consumers and now they are paying for their actions.”

Fairbanks (now called Select Portfolio Servicing, Inc. (SPS)) is a mortgage servicing company that deals with sub-prime loans (which are higher risk, higher interest rate loans that are non-conforming to the secondary market). The primary responsibility of a mortgage servicing company is to allocate principal and interest to the customer’s account. These companies must also account for insurance and taxes for those customers that have an escrow account, and assess and collect fees from customers that pay late or violate the terms of the loan.

13,996 checks were mailed from Fairbanks to Michigan consumers on Friday, December 10, 2004. Amounts of the checks varied, with a range from $18 to $350 per check. According to the settlement, Fairbanks (SPS) agreed to pay $900,000 in restitution to Michigan consumers to settle the numerous alleged violations of Michigan law. Fairbanks (SPS) agreed to reimburse OFIS a total of $97,473 in investigation expenses. Fairbanks also agreed to improve customer service procedures, refrain from attempting to collect unjustified late fees, and establish proper procedures to prevent unwarranted lender-placed insurance. Fairbanks agreed to the settlement, and denied any violations of Michigan law.

In November 2003, Fairbanks signed an agreement with the Federal Trade Commission (FTC) in which borrowers will receive refunds for other improper fees, including unjustified late fees and lender-placed insurance. The Michigan settlement addressed issues not covered by the FTC settlement.