Letter to the Mortgage Bankers Association Regarding FTC Settlement with Fairbanks

l J N I 1 t V STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON. D C. 20580
June 17,2004
Jonathan L. Kempner
President and Chief Executive Officer
Mortgage Bankers Association
1919 Pennsylvania Avenue, N.W.
Washington, D.C. 20006-3404 	,
Re: 	Stipulated Final Judgrnent and Order as to Fairbanks Capital Corp. and Fairbanks
Capital Holding Corp, reached in United States of America v. Fairbanks Capital
Corp., et al., Civil Action No. 03-12219 (DPW) (D. Mass.)
Dear Mr. Kempner:
Thank you for your letter regarding the Comission's recent settlement with Fairbanks
Capital Holding Corp. and Fairbanks Capital Corp. (collectively, "Fairbanks"). 	You have asked
for the Commission's position regarding the scope of the Order and the application of the
provisions contained therein to other mortgage servicing companies that were not a party to the
agreement. I am pleased to provide you with the following staff guidance. Please understand
that these are the views of the staff and do not constitute a formal Commission opinion.
The Federal Trade Commission often enters into consent orders with individuals and
companies that the Commission has reason to believe have violated the FTC Act or other laws
enforced by the Commission. In general, consent orders enjoin the defendants from violating the
law in the future, for example, by prohibiting the alleged unfair or deceptive practices.
Moreover, to protect the public from those who have demonstrated a propensity to violate the
law, these orders often contain provisions that place additional constraints upon a wrongdoer that
do not necessarily apply to other businesses that have not engaged in violations. See FTC v.
Colgate-Palmolive Co., 380 U.S. 374, 395 (1965) ("The Commission is not limited to
prohibiting the illegal practices in the precise form in which it is found to have existed in the
past. Having been caught violating the [FTC] Act, respondents must expect some reasonable
fencing in."). 	These "fencing-in" provisions have legal force only against the defendants who
signed the order and anyone with whom those defendants act in concert. The Commission's
consent order with Fairbanks reflects the Commission's views of the specific remedies necessary
to resolve the particular allegations against that company.

Jonathan L. Kempner
May 18,2004
Page 2
By way of example, Part V of the Fairbanks order enjoins the defendants from assessing
or collecting certain fees -that may be otherwise authorized and permitted by law -except as
provided in the order. This section includes specific conditions and time frames for the
imposition of such fees. The provision is not intended to impose a Federal rule or standard
requiring all mortgage servicers to abide by the enumerated requirements. Rather, it serves the
dual purposes of protecting consumers from further deception by the defendants, and providing
specific guidance to the defendants on complying with the order. It should be noted that this
provision expires after five years.
Thank you for your inquiry.
Sincerely,
ociate Director
ision of Financial Practices

May 6, 2004
Mr. Joel Winston
Associate Director
Division of Financial Practices
Federal Trade Commission
601 New Jersey Ave., N.W.
Washington, D.C. 20580
RE: 	Stipulated Final Judgment and Order as to Fairbanks Capital Corp. and
Fairbanks Capital Holding Corp. reached in United States of America v.
Fairbanks Capital Corp. et. al.
Dear Mr. Winston:
Since the Federal Trade Commission's November 12, 2003 announcement of its
settlement with Fairbanks Capital Holding Corp. and Fairbanks Capital Corp.
(hereinafter collectively as "Fairbanks"), some advocates have suggested to members
of the Mortgage Bankers Association ("MBA")1 that the Commission has created federal
rules relating to the servicing of mortgage loans that are set forth in the Stipulated Final
Judgment and Order as to Fairbanks Capital Corp. and Fairbanks Capital Holding Corp.
(hereinafter "the Order"). These advocates suggest that a mortgage servicer that fails
to follow the rules set forth in the Order will be subject to legal liability.
MBA and its members have concerns regarding this assertion because several
provisions of the Order appear to be either inconsistent with federal regulations, judicial
opinions, and/or state law or not supported by those regulations, opinions, or state laws.
While a detailed analysis of the Order is beyond the scope of this letter, we would be
more than happy to provide you with a detailed analysis of the provisions upon your
request.
1 The Mortgage Bankers Association (MBA) is the national association representing the real estate finance
industry, an industry that employs more than 400,000 people in virtually every community in the country.
Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation’s
residential and commercial real estate markets; to expand homeownership prospects through increased
affordability; and to extend access to affordable housing to all Americans. MBA promotes fair and ethical
lending practices and fosters excellence and technical know-how among real estate finance professionals
through a wide range of educational programs and technical publications. Its membership of approximately
2,700 companies includes all elements of real estate finance: mortgage companies, mortgage brokers,
commercial banks, thrifts, life insurance companies and others in the mortgage lending field. For additional
information, visit MBA’s Web site: www.mortgagebankers.org.

Mr. Joel Winston
May 6, 2004
Page 2
MBA and its members would appreciate you providing us with the Commission's
position regarding the scope of the Order and the application of the provisions
contained therein to other mortgage companies that were not a party to the agreement.
If you have any questions, do not hesitate to contact me at (202)557-2701.
Most sincerely,
Jonathan L. Kempner
President and Chief Executive Officer