Mortgage Go-Betweens Snag NH Consumers

Three years ago, Michael Dillon refinanced his 100,000 dollar home near downtown Manchester.
He saw it as a short term investment.
He wanted to fix it up to sell, so that he could purchase an even better home for him and his fiance Jenna.
But shortly after the refinancing, the bank transferred the servicing of that loan to a subprime mortgage servicing company then called Fairbanks Capital Corporation.

Like other servicing companies, Fairbanks doesn't own mortgages, it simply takes care of all the administrative work, from collecting payments to sending out notices.
Michael Dillon says problems with his loan started at the time of transfer.

Pretty much from day one, they've maintained that I've been in default, it just snowballed right from there

It's a common practice in real estate lending for banks to transfer mortgage loans to a servicing company.
But Dillon says he wasn't notified of the switch and mistakenly sent his mortgage payment to his old bank.
When he discovered the error, he says he made the payment to Fairbanks.
That should have been the end of the problems, but then he started receiving notice of late fees, and unexplained charges.
His fiance Jenna - who doesn't want her last name used - says even notices from the company were unclear.

They were deceptive in how they did a lot of it, we would get western unions in the mail that looked like junk mail, and never opened them because it looked like western union junk mail and we came to find out we were wrong, they were letters from Fairbanks, saying you owe this, pay that and that.

As a mortgage servicing company, Fairbanks makes money from charging fees.
But Dillon says the company also charged him for homeowners insurance without his knowledge.

"The force placed insurance cost roughly three times what a regular homeowners insurance would cost, and I already had my own homeowners insurance.

For months, Dillon says he tried to clear up the problems, both in writing and over the phone.
But he says Fairbanks wouldn't send him a payment history in writing.
When the company ultimately threatened foreclosure, Michael hired attorney Roy Tillsley.
Tillsley says Dillon's story is not unusual among customers of mortgage servicers.

"Once they've determined that your behind, it's set in stone, I think that's the frustrating part for most consumers is once this appears on your statement and they start hitting you with late charges, it is , even with the help of an attorney, very difficult to get those things reversed."

Knowing where to turn for help can be equally frustrating.
Before hiring an attorney, Dillon contacted New Hamsphire's Banking Commission for help.
Banking Commissioner Peter Hildreth says there were 28 similar complaints about Fairbanks.
But beyond contacting the company on behalf of consumers, at the time, there was very little they could do.

"we really had very little authority over a company like Fairbanks, they registered with us, we could only revoke that registration for problems with escrow at a closing, basically our authority was very limited."

And New Hampshire was not alone.
Many states don't have any laws that regulate mortgage servicers, says Attorney John Rao with the National Consumer Law Center.

"There are quite a few states where there is either no law at all that deal with mortgage servicers there's also very little regulation of mortgage servicers, they're sort of this entity where for a lot of regulators they just don't know what to do with them"

New Hampshire's attorney general office was also receiving complaints about Fairbanks.
Homeowners accused the company of charging them for insurance, failing to credit payments, and adding unauthorized fees.
Assistant Attorney General David Rienzo says investigating Fairbanks was difficult because of confusion about which laws apply to mortgage servicers.
But he also says the department is short-staffed, and there's a need to triage cases like Fairbanks.

"Banking commission and Consumer Protection Division worked together as much as we could in this matter, and eventually we were told that the federal trade commission was dealing with Fairbanks, so we contacted the FTC."

The Federal Trade Commission alleged that Fairbanks had violated several federal laws, including the Fair Trade Act, the Fair Debt Collection Practices Act, and the Fair Credit Reporting Act.
In November of last year, Fairbanks settled the class-action suit with the FTC and HUD, paying more than 40-million dollars to consumers.
The FTC says 280-thousand consumers were part of that class action.
But Michael Dillon's attorney Roy Tillsley advised him to opt out of the settlement.

"That settlement provided a small sum to all of the people involved, in Mike's situation because the problem hadn't been resolved he was facing foreclosure, some kind of a small settlement isn't going to do him any good in terms of saving his house, so he needed to opt out to retain his rights and protect his home.

Dillon joined 1000 other homeowners who decided not to take the offer. But FTC attorney Allison Brown says the settlement with Fairbanks is supposed to protect those who opted out from wrongful foreclosures.

Even if for people who opted out, Fairbanks is still bound to treat them in accordance with the FTC HUD order, so you can't opt out of the injunctive relief.

Fairbanks, now Select Portfolio Servicing, refused a taped interview.
They also refused to talk about specific cases.
But company officials say they've changed their practices, replaced a majority of senior management and now offer customers an ombudsman to settle disputes that can't be worked out through their loan resolution department.
But to date, none of that has helped Michael Dillon and Jenna.
They say what's happened to them is similar to predatory lending.

" At least with predatory lending, most people are aware of it now, and you can see it on its face for what it is, but predatory servicing, I guarantee you that nine out of ten people have no clue what's happening to them until it's too late, and you're sitting their with a foreclosure notice in your lap."

Since August of last year, state laws changed to allow the banking commission to regulate mortgage servicers and punish them if necessary.
And while that may shield future homeowners, its not clear what protection past Fairbanks customers have.
The company has moved forward with foreclosure on Michael Dillon's home.
A court has issued a temporary injunction to stop Fairbanks from taking Dillon's house.
A trial is scheduled to begin in January.
For NHPR news, I'm Amy Quinton.