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FOR IMMEDIATE RELEASE: 12-Nov-2003
CONTACT PRESS OFFICE: 202-228-1122
Press Release of Senator Mikulski
Mikulski Joins FTC and HUD to Announce Major Settlment for Victims of Fairbanks Capital
Mikulski Demanded Federal Investigation into Practices of Mortgage Service Company
Wednesday, November 12, 2003
Washington, D.C. ? Senator Barbara A. Mikulski (D-MD) today joined Federal Trade Commission Chairman Timothy Muris, Department of Housing and Urban Development (HUD) Secretary Mel Martinez, HUD Inspector General Kenneth Donohue, and Paul S. Sarbanes (D-MD) to announce a settlement with Fairbanks Capital Corporation following a major investigation of the mortgage servicing company?s practices. Senator Mikulski called for the federal investigation into Fairbank?s practices in March 2003.
FTC found that Fairbanks engaged in a variety of unfair, deceptive, and illegal practices in the servicing of subprime mortgage loans. These included:
? Failure to post consumers? mortgage payments in a timely way, and then charging consumers late fees or additional interest for not making payments ?on time.?
? Charging consumers for unnecessary casualty insurance
? Assessing unwarranted late fees, delinquency fees and attorneys? fees.
In separate settlements, Fairbanks will pay $40 million and former Fairbanks CEO Thomas Basmajian will pay $400,000 into a fund that will be distributed by the FTC to Fairbanks customers who were charged illegal fees. The settlement agreement also includes provisions to restore consumers? credit and prevent illegal practices in the future. ?Today is a great day for consumers,? said Senator Mikulski. ?This settlement with Fairbanks creates a $40 million restitution fund so victims can get their money back. It forces Fairbanks to restore customers? credit so innocent homeowners can get their good name back. And it sets new rules so people can pursue the American dream of homeownership without being cheated by unfair fees, unneeded insurance, or uncalled for foreclosures. It took a real team effort to make this happen and I?m proud to be part of it.?
Senator Mikulski called for a federal investigation of Fairbanks after hearing through local news reports that the company was threatening a number of Marylanders with foreclosure even though they had made their mortgage and tax payments on time. In one case, a woman paid Fairbanks nearly $6,000 in illegal fees to save her home from foreclosure.
Senator Mikulski raised the issue of Fairbanks at a March 6, 2003 Senate hearing on HUD?s budget. At that hearing, Senator Mikulski, the senior Democrat on the Appropriation Subcommittee that funds HUD, said: ?There was an investigative report on local Baltimore TV about this corporation [Fairbanks] sending false letters to homebuyers telling them they were delinquent in their loan and that they were going to foreclosure, scaring the heck out of homebuyers. [Fairbanks was] creating chaos in their minds and chaos in the marketplace . . I want to discuss this with the Inspector General, because we want to know who this company is and what are they doing. How can we stop the fraud? If someone has been a victim, where can they go? We want to help the local consumer that has been, once again, schemed and scammed, and get to the bottom of it . . . We have to stand firmly against any fraud, scheme, scam and scum.?
? Asking HUD Inspector General Kenneth Donohue to conduct a criminal investigation and to act as a clearinghouse for victim?s complaints.
? Directing Secretary Martinez to lead an investigation into any violations of HUD regulations. Senator Mikulski asked that HUD share all information relating to the Fairbanks case with the appropriate federal agencies.
? Bringing representatives of the HUD IG?s office to Baltimore to meet directly with a number of families affected by Fairbanks? illegal practices.
? Asking Attorney General John Ashcroft to commit the resources and expertise of the Justice Department to the ongoing HUD investigation in to Fairbanks. In a letter to Ashcroft, Senator Mikulski wrote, ?I believe that the Justice Department, working with the HUD Inspector General, can achieve justice for the victims of Fairbanks and root out the fraud that is currently destroying lives and communities.?
?When I heard that innocent people in Maryland and across the country were being gouged and ripped off, I vowed to stop it,? said Senator Mikulski. ?I vowed to stand up for consumers and go after the scammers and schemers. This isn?t the first time. Working on a bipartisan basis with leadership of HUD, we?re going after property flippers and predatory lenders. I helped create a flipping task force in Baltimore to be a model for the nation and it?s working. Flipping is down 80% in Baltimore over the last three years. But when you shut down one scheme, crooks will find another. That?s what we saw with Fairbanks. And that?s why I worked hard to make sure they didn?t cheat another homeowner in Baltimore or anywhere in the country.?
To see the letters Senator Mikulski wrote to Secretary Martinez, Inspector Donohue, Attorney General Ashcroft or Chairman Muris, please visit Senator Mikulski?s web site at http://mikulski.senate.gov/fairbanks_investigation.pdf
For more information on the details of the settlement, please visit the FTC web site at http://www.ftc.gov