Mortgage Nightmares Continue for Atlantic City, N.J.-Area Homeowners

The Philadelphia Inquirer

Amy S. Rosenberg

January 8, 2004

Jan. 8--ATLANTIC CITY, N.J. -- Sure, the Fairbanks mortgage company agreed in November to repay $40 million to settle Federal Trade Commission allegations that it had unscrupulously duped thousands of homeowners into default.

But where does that leave people like Shirley Green of Cape May Court House?

Still trying to stave off foreclosure on two modest rental properties that were supposed to be her retirement nest egg, based on what she says were some of the same practices Fairbanks Capital Corp. has promised to curtail.

One of thousands who contend the Utah-based company hit them with bogus fees and charges, misapplied payments, and then moved toward premature foreclosure proceedings, Green saw her drama being played out in an Atlantic City courtroom this week.

Late Tuesday, representing herself, the 58-year-old businesswoman pulled off a veritable Perry Mason moment when she whipped out the FTC documents describing the settlement with Fairbanks -- to the visible agitation of the bank attorney.

"They have been noted for doing this sort of activity," she proclaimed. "I have proof. Everything I'm here testifying about, they've been charged with this same stuff."

Maybe so, but because the settlement between Fairbanks and the Federal Trade Commission contains no admission of guilt, Chancery Court Judge George L. Seltzer yesterday refused to allow any of those documents into evidence.

Lucy Morris, a senior attorney at the Trade Commission, acknowledged yesterday in a telephone interview that the $40 million settlement and injunctive relief would be of little use in staving off the losses of properties already in foreclosure proceedings.

"I don't know how helpful it will be for someone like her," Morris said. "It will be helpful to people going forward. It's not going to stop her foreclosure. It might get her some money."

For Green, the frustration over being unable to show how the federal charges and allegations of predatory lending practices might bolster her case was just the latest burden in an ordeal she says has taken its toll.

"This is the pits," she said during a courtroom break yesterday. "This is nerve-racking. It's strenuous. My whole life has been put on hold."

The foreclosure hearing -- sought by the bank that owns the mortgage, Chase Manhattan (Fairbanks is the servicer) -- ended yesterday afternoon at a standoff, with the judge promising a ruling in about a week.

Robert Pinel, the attorney representing the bank, told the judge that Fairbanks had tried numerous times to resolve the differences short of foreclosure, and that Green had been unwilling to do so. He suggested that she was actually benefiting from the protracted proceedings -- which date to 2001 -- because she was still collecting rent.

But the judge did not want to hear anything about motives on either side. So the testimony was mostly confined to a confusing droning back and forth over which checks were sent when, how they were applied, and why Green -- a successful owner of a paving and tree-removal business -- was suddenly unable to keep her mortgages current after Fairbanks took over as the servicer.

The hearing pitted Green, in her pink wool blazer and black velvet bowed cap, up against Joy Brodowsky-Lines, a 20-something, gray-suited "problem resolution supervisor" at Fairbanks.

Brodowsky-Lines tried to show the logic in how Green's two mortgages were placed in default, but acknowledged at least two misapplied payments. The mortgage payments were about $639 for one property and $725 for the other.

In one instance, Fairbanks sought proof that Green was properly insured, then raised her premium before she could submit that proof. When Green sent in the next check at the old rate, the money was placed into a suspense account rather than credited as a payment. That made her account delinquent.

In other cases, Fairbanks tacked on a "broker's price opinion" or a "corporate advance activity" charge that also diverted money from being applied as a monthly payment.

Brodowsky-Lines said those fees were for actions the company needed to take to "protect its interests."

But Green says those fees and other tactics resulted in the company's failing to properly credit her for full monthly payments, which led the company to find her in default. Then, subsequent monthly payments were refused by Fairbanks.

Fairbanks alleges that she simply fell behind in her payments and refused its efforts to resolve the difference.

Morris, the Trade Commission attorney, says Fairbanks -- which deals mostly with high-risk subprime loans -- has agreed to change tactics similar to those described by Green.

The company agreed to accept partial payments from consumers and apply most payments first to interest and principal and to refrain from charging a variety of unauthorized fees, she said.

The properties in question are ranchers on West Main Street in the historically black neighborhood of Whitesboro in Cape May Court House, Green says. Green said there were other homes in the neighborhood in foreclosure proceedings, which she called the result in part of pressure from developers looking to acquire properties.

Echoing other consumers who complained to the federal government, Green said: "They terrorized me the complete time. As soon as they took it over, that's where they started harassing."

In announcing the settlement, a government official said the agencies are serious about protecting consumers from "those who would try to steal their American dream." But as the drama was played out in the courtroom, Green's retirement nest egg was still in limbo.

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