THE ONE CAUTIONARY PHRASE THAT KEEPS COMING UP IN THE WAKE OF the huge influx of new servicing during the past two years is: "wake-up call." [??] Not the kind that deep-sleeping hotel guests rely on to rise early, but the kind that smart-thinking mortgage companies heed when there is trouble all around them. [??] Two years after the nonprime servicing company Fairbanks Capital Corporation, Salt Lake City, ran afoul of the Federal Trade Commission (FTC) for certain servicing practices, and a year after Ocwen Federal Bank, West Palm Beach, Florida, also was cited for transgressions by the Office of Thrift Supervision (OTS), vigilance has spread widely [??]
"The industry, as a whole, has definitely taken this as a true wake-up call, which is a good thing," says Diane Pendley, managing director, operational risk, structured finance, at Fitch Ratings, New York. Fitch, along with Standard & Poor's (S & P) and Moody's Investors Service, both based in New York, are the top three credit-rating agencies in the domestic and international fixed-income securities markets; as such, they have come to play increasingly important roles in regulatory affairs. [??] These, and other, analysts repeatedly insist that the Fairbanks and Ocwen cases were not intended to put other nonprime--or any--servicing companies on notice, yet more than a few have come to view these rulings as "fenceposts," clearly delineating what may (not) be done. [??] In some respects, that is a healthy result. [??] "Every servicer is best served by carefully reviewing these cases," Pendley advises," and establishing controls to avoid similar situations." At base, she says, "servicers should look at their practices and ask themselves: How would regulators look at what we're doing?"
Fitch and others with stakes in the game want servicers to keep the pressure on their processes and staff, according to Pendley, "so that good results continue for both the consumer and the investors. There's no reason to believe it won't," she adds optimistically.