Rival Hires HomEq Exec
Fairbanks Capital Corp., the nation's largest subprime servicer, has a new compliance chief.
In and of itself, that might not sound like a big deal, but until a year ago, the Salt Lake City-based Fairbanks didn't have a compliance department and until it hired Valorie Kacherian away from HomEq Servicing in April, it never had a chief compliance officer.
Right about now, Fairbanks could use a chief compliance officer as well as a good compliance department. The company is under investigation by the Department of Housing and Urban Development and the Federal Trade Commission for its servicing practices.
A spokeswoman for Fairbanks confirmed to Mortgage Servicing News that Ms. Kacherian joined the company April 1 to head the non-depository's compliance effort.
The spokeswoman said that until the hiring of Ms. Kacherian, the company did not have a chief compliance officer. "It's an enhancement to what they have," she said. "It's a new position, a new title."
At HomEq, a subsidiary of Wachovia Corp., Charlotte, N.C., Ms. Kacherian was a vice president.
The spokeswoman noted that even though Fairbanks did not establish an official compliance department until the first quarter of 2002, "there were always compliance people working at the company. They worked under the legal department."
She said she did not know how many people at Fairbanks work in the compliance area.
At the request of two U.S. senators from Maryland, HUD is looking into allegations that the company mishandled mortgage servicing accounts and overcharged homeowners.
A source familiar with the matter said investigators for HUD have begun interviewing former employees of Fairbanks in regard to their servicing practices.
The source said that HUD "is not even close to making a decision as to who is in the wrong here."
Fairbanks manages $49.3 billion in receivables. The company said it is reviewing its servicing practices. The company spokeswoman said the firm is not commenting on the HUD investigation except to say, "We're continuing to cooperate with them."
Fairbanks is owned, in part, by PMI Group, San Francisco, a publicly-traded mortgage insurance company. Fairbanks was founded in 1989 by Thomas Basmajian, and a partner, Terrell Smith. It has grown rapidly over the past few years through acquisitions.
Mr. Basmajian is chief executive office of Fairbanks, and according to one source, the architect of the company's explosive growth the past few years.
In some cases Fairbanks purchased subprime servicers that were going out of business or were being divested by their parent firms. In late 2001, Fairbanks bought $26 billion in subprime receivables from EquiCredit of Jacksonville, Fla., a Bank of America subsidiary.
In 2000, the company bought $9 billion in servicing from the bankrupt ContiFinancial, Hatboro, Pa.
Prior to starting Fairbanks, Mr. Basmajian owned a California concrete company called Basmajian Brothers. In the early 1980s, he started a broker/dealer called Churchill Investments.
Sen. Paul Sarbanes of Maryland, the ranking Democrat on the Senate Banking Committee, also has asked Fannie Mae and Freddie Mac to review allegations regarding the servicing practices of Fairbanks.
In a letter to top officers at both GSEs, Sen. Sarbanes writes that he is under the impression that Fairbanks may service loans for the two secondary market giants.
As MSN went to press, it was not known how many loans Fairbanks was servicing for the two. Both GSEs are reviewing the matter.
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