The Legal Guide to

Mortgage Servicing

Implementing New Industry Standards Post-Fairbanks Practical Strategies for Reducing Legal Risks

Monday, May 24, 2004

About

Are You Prepared for the Intense Scrutiny of the FTC Regarding Your Servicing Processes?

Do Your Servicing Methods Measure up to the Fairbanks Standards?

The landmark settlement between Fairbanks Capital Corporation and the FTC and HUD last November heralded a new focus of federal enforcement for the mortgage industry.

While mortgage lending practices have been a popular target for the past few years, servicing in the non-prime market has become the major concern of the FTC, HUD, banking regulators, consumer advocacy groups and aggressive State Attorneys General. Now that there are explicit guidelines stemming from the Fairbanks settlement, mortgage lenders are scrambling to enact their own "best practices" servicing model in hopes of avoiding class action suits and liability on the federal, state and individual level. With penalties and settlements reaching the tens of millions of dollars, potential negative effects on the grading of mortgage backed securities and the servicing companies, the costs of not being fully informed are enormous.

American Conference Institute has developed this timely publication in order to provide you with an intensive and focused assessment of what the Fairbanks settlement means for your company, how to implement its guidelines, and its overall significance on the mortgage industry as a whole.

Senior industry insiders from Ameriquest Mortgage Company, Bank of America, Fairbanks Capital Corporation, Fannie Mae, Freddie Mac, GMAC Mortgage, New Century Mortgage Corporation, Standard & Poor's, Moody's Investors Service, National Home Equity Mortgage Association, and the National Community Reinvestment Coalition gave their expert advice on:

  • New paradigms for payment, acceleration and force-placed insurance
  • Implementing post-Fairbanks processes for charging fees, disclosures and disputes
  • The status of Fairbanks as an industry standard
  • The OCC pre-emption rule and its effect on mortgage servicing
  • How to create a first-rate internal compliance environment
  • Identifying conflicts of interest when dealing with third party mortgage servicers
  • What servicers should be doing to protect themselves from potential class action suits

In addition, key representatives from the US Attorney's Office, US Department of Housing and Urban Development, Federal Trade Commission, Office of the Comptroller of the Currency, California Department of Corporations, and the North Carolina Office of the Commissioner of Banks offered their insights and knowledge on how to reduce your legal exposure in the wake of this important development.

Contents & Contributors

About

Are You Prepared for the Intense Scrutiny of the FTC Regarding Your Servicing Processes?

Do Your Servicing Methods Measure up to the Fairbanks Standards?

The landmark settlement between Fairbanks Capital Corporation and the FTC and HUD last November heralded a new focus of federal enforcement for the mortgage industry.

While mortgage lending practices have been a popular target for the past few years, servicing in the non-prime market has become the major concern of the FTC, HUD, banking regulators, consumer advocacy groups and aggressive State Attorneys General. Now that there are explicit guidelines stemming from the Fairbanks settlement, mortgage lenders are scrambling to enact their own "best practices" servicing model in hopes of avoiding class action suits and liability on the federal, state and individual level. With penalties and settlements reaching the tens of millions of dollars, potential negative effects on the grading of mortgage backed securities and the servicing companies, the costs of not being fully informed are enormous.

American Conference Institute has developed this timely publication in order to provide you with an intensive and focused assessment of what the Fairbanks settlement means for your company, how to implement its guidelines, and its overall significance on the mortgage industry as a whole.

Senior industry insiders from Ameriquest Mortgage Company, Bank of America, Fairbanks Capital Corporation, Fannie Mae, Freddie Mac, GMAC Mortgage, New Century Mortgage Corporation, Standard & Poor's, Moody's Investors Service, National Home Equity Mortgage Association, and the National Community Reinvestment Coalition gave their expert advice on:

  • New paradigms for payment, acceleration and force-placed insurance
  • Implementing post-Fairbanks processes for charging fees, disclosures and disputes
  • The status of Fairbanks as an industry standard
  • The OCC pre-emption rule and its effect on mortgage servicing
  • How to create a first-rate internal compliance environment
  • Identifying conflicts of interest when dealing with third party mortgage servicers
  • What servicers should be doing to protect themselves from potential class action suits

In addition, key representatives from the US Attorney's Office, US Department of Housing and Urban Development, Federal Trade Commission, Office of the Comptroller of the Currency, California Department of Corporations, and the North Carolina Office of the Commissioner of Banks offered their insights and knowledge on how to reduce your legal exposure in the wake of this important development.

Contents & Contributors

SERVICING BEST PRACTICES
William Smith, Option One Mortgage Corporation

SUB-PRIME MORTGAGE SERVICING BEST PRACTICES PRESENTATION
David Berenbaum, National Community Reinvestment Coalition

THE IMPACT OF THE FAIRBANKS SETTLEMENT ON THE MORTGAGE INDUSTRY
Paul F. Hancock, Hogan & Hartson LLP

STATE INITIATIVES ON MORTGAGE SERVICING: NORTH CAROLINA'S EXPERIENCE
Joseph A. Smith, Jr., North Carolina Office of the Commissioner of Banks

STATE INITIATIVES ON MORTGAGE SERVICING
Bennet Koren, McGlinchey Stafford PLLC

ANALYZING SERVICING FEES
Jeffrey P. Naimon, Buckley Kolar LLP

THE LEGAL GUIDE TO MORTGAGE SERVICING
Stephen Ornstein, Thacher Proffitt & Wood LLP

FEES, DISCLOSURES AND DISPUTES: CREATING AND IMPLEMENTING POST-FAIRBANKS POLICIES - THE STATE LAW PERSPECTIVE
Loretta Salzano, Franzčn & Salzano P.C.

PAYMENT POSTING AND HANDLING, ACCELERATION AND FORCE-PLACED INSURANCE
Melanie Brody, Kirkpatrick & Lockhart LLP

DEVELOPING AND IMPLEMENTING AN INTERNAL COMPLIANCE PROGRAM FOR MORTGAGE SERVICERS
Gregory E. Harmer, Fairbanks Capital Corporation

THIRD PARTIES AND AFFILIATED PROVIDERS: AVOIDING LIABILITY AND MANAGING CONFLICTS
Donald C. Lampe, Womble Carlyle Sandridge & Rice PLLC

WORKING WITH CONSUMER ADVOCATES TO MINIMIZE PROTENTIAL CLAIMS
Marc Loewenthal, New Century Mortgage Corporation

RISK MANAGEMENT IN MORTGAGE LOAN SERVICING AND COLLECTION: A RECOMMENDED APPROACH TO RISK ANALYSIS
Andrew L. Sandler, Skadden, Arps, Slate, Meagher & Flom LLP
Benjamin B. Klubes, Skadden, Arps, Slate, Meagher & Flom LLP
Anand S. Raman, Skadden, Arps, Slate, Meagher & Flom LLP
David B. Lenand, Skadden, Arps, Slate, Meagher & Flom LLP

IDENTIFYING AND ADDRESSING CLASS ACTION RISK FACTORS IN MORTGAGE SERVICING
Brian Brooks, O'Melveny & Myers LLP

LEGAL UPDATE: RESPONDING TO PROPOSED ENFORCEMENT ACTIONS BY THE FEDERAL BANKING AGENCIES
Joseph Lynyak, Reed Smith LLP

TRENDS IN RESIDENTIAL MORTGAGE SERVICING PRACTICES
Jason Grohotolski, Moody's Investors Service

RESPONSIBLE SERVICING
Frank Madden, GMAC

CONSUMER PROTECTION ISSUES IN MORTGAGE SERVICING
Randal Shields, Bank of America

STANDARD & POOR'S SERVICER EVALUATIONS
Richard Koch, Standard & Poor's

SERVICING PRACTICES AND THE SECONDARY MARKET: THE RATING AGENCIES AND GSE'S
Diane Pendley, FitchRatings



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