FTC to Issue Subprime Servicing Standards?

The Federal Trade Commission will issue a "very significant consent decree" before year-end that establishes a "best-practices" standard for servicers of subprime loans, according to one industry attorney.Skadden Arps attorney Andrew Sandler told a fair-lending conference that an FTC official who spoke about subprime servicing at an American Bar Association meeting in August outlined 10 areas of concern, including timely posting of payments, forced-place insurance, and aggressive foreclosures. Mr. Sandler told the Consumer Bankers Association conference that most servicers have problems with forced-place insurance because subprime loans generally don't have escrow accounts for property insurance and taxes. He recommended that subprime lenders get the escrow whenever they can, "because that prevents equity stripping, asset-based lending," and other kinds of predatory practices. Mr. Sandler did not indicate the target of the FTC's consent decree, but it is well known that Fairbanks Capital Corp., Salt Lake City, is the subject of an FTC investigation into servicing abuses. A spokeswoman for the subprime servicing company declined to comment on settlement talks.