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The Federal Trade Commission today announced that it has reached an agreement with a major subprime mortgage servicer to modify certain terms of a 2003 court settlement, providing substantial benefits to consumers beyond those in the original settlement, including account adjustments and reimbursements or refunds of fees paid in certain circumstances.

In November 2003, Fairbanks Capital Corp. and Fairbanks Capital Holding Corp. agreed to pay $40 million to settle with the FTC and the U.S. Department of Housing and Urban Development (HUD), which charged them with engaging in a number of unfair, deceptive, and illegal practices in the servicing of subprime mortgage loans. The Commission distributed the $40 million as redress to affected consumers. The settlement also imposed a number of specific limitations on Fairbanks’s ability to charge fees and engage in certain practices when servicing mortgage loans. In early 2004, the defendants changed their names to Select Portfolio Servicing, Inc. and SPS Holding Corp.

The FTC conducted a review of Select Portfolio Servicing’s compliance with certain aspects of the 2003 settlement. The FTC and Select Portfolio Servicing negotiated and agreed to several modifications of the settlement. HUD has also agreed to these changes, which include:

  • A five-year prohibition on marketing optional products, which are products or services that are not required by the consumer’s loan (such as home warranties).
  • Refunds of optional product fees paid by consumers in certain circumstances.
  • Revised limitations on charging attorney fees in a foreclosure or bankruptcy to ensure that consumers receive full disclosures, including the actual amount due if they receive an estimated fee. Select Portfolio Servicing also will conduct reconciliations after payoff or foreclosure and reimburse consumers who may have paid for services that were not actually performed.
  • Refunds for consumers who may have paid foreclosure attorney fees for services that were not actually performed since November 2003.
  • A permanent requirement that consumers be provided with monthly mortgage statements containing important information about their loans.
  • A requirement that Select Portfolio Servicing revise its monthly mortgage statements based on consumer testing performed by a qualified, independent third party (which the company has already done).
  • A requirement that Select Portfolio Servicing continue to use a qualified, independent third party to perform annual audits of its compliance with key settlement provisions until 2013. The results of these audits will be subject to review by the FTC.
  • Revision of specific provisions to permit Select Portfolio Servicing to engage in certain practices that were prohibited by the original settlement. For example, the modified settlement allows the company to hold or reject a payment that is more than $25 short of the consumer’s monthly principal and interest payment so long as the consumer receives prompt notice of the action. The settlement continues to prohibit the company from applying such payments to fees before principal and interest.

The Commission vote to authorize staff to file the modified stipulated final judgment and order was 5-0. The motion requesting entry of the modified settlement order was filed in the U.S. District Court for the District of Massachusetts.

NOTE: This modified stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. A modified stipulated final order requires approval by the court and has the force of law when signed by the judge.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click

(FTC File No. X04-0005)

Contact Information

Frank Dorman,
Office of Public Affairs
Allison Brown,
Bureau of Consumer Protection