FTC Eyes Servicers

Federal Trade Commission is continuing to focus its investigations on mortgage servicing practices but it also has it eyes open for other abusive and predatory practices at targeted companies.

The consumer protection agency does not conduct investigations with "blinders on," FTC associate director Peggy Twohig told a fair lending conference sponsored by the Consumer Bankers Association.

"If FTC puts the spotlight on a lender, we don't look at that lender with eyes closed. We will gather information to see if there are other issues such as predatory lending," Ms. Twohig said.

FTC investigators review consumer complaints filed against lenders, as well as confidential Home Mortgage Disclosure Act reports provided by the Federal Reserve Board.

For the past two years, the Fed has shifted though the HMDA data and complied a list of over 200 lenders that charge minority borrowers significantly higher interest rates and fees than white borrowers.

This data can be used to spot possible discriminatory pricing practices, as well as targeting of low-income and minority borrowers. But additional borrower and company loan data is needed to prove it.

Attorney Andrew Sandler, a partner at Skadden Arps, told the fair lending conference FTC is conducting several investigations of servicing companies. In two cases, FTC investigators also asked for HMDA data and loan pricing analysis.

Ms Twohig refused to comment on any investigations, except to confirm that an investigation of EMC Mortgage Corp., the servicing arm of Bear Stearns, is ongoing. The Wall Street investment banking firm disclosed last December that FTC had launched a preliminary investigation of EMC's servicing practices.

In 2003, an FTC investigation of Fairbanks Capital Corp. alleged widely reported abusive servicing practices, and the Salt Lake City subprime servicer agreed to a $40 million settlement.

The settlement also spells out best practices that Fairbanks, which subsequently changed its name to Select Portfolio Servicing, agreed to implement.

FTC expected the servicing industry would adopt the best practices dealing with prompt posting of payments, late fees, forced place insurance and credit bureau reporting. But FTC investigations indicate that has not happened.

FTC is pursuing "additional enforcement actions to drive the message home that the industry has to be focused" on best practices, said Mr. Sandler, who heads Skadden Arps consumer financial services enforcement and litigation practice.

He also told the CBA conference that several state attorneys general are conducting servicing investigations that are focused on "Fairbanks issues."

In conducting investigations, FTC generally asks companies to voluntarily provide information. But that is changing. "FTC plans to use its subpoena power more often to insure the agency receives accurate data in a timely fashion," Ms. Twohig said. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com

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