Kathleen Cei Photo
JoAnne DeGoursey: "We had to pack up a house of 54 years."
JoAnne DeGoursey had a "bad feeling" when the mortgage on her West Haven family home was sold to Fairbanks Capital Corp.
Eighteen months and two missed payments later, her home was in foreclosure and DeGoursey and her sister were out, victims of a national mortgage servicing company that had swindled thousands of people and snatched their homes through foreclosure. A class action lawsuit felled Fairbanks Capital, but it has since re-emerged with a new name and some of the same old questionable practices, state regulators say.
DeGourseys' story begins in 2000 the day she and her sister, Linda Audette, inherited the two-story Cape built by their father. DeGoursey is legally blind—she can read large print with a magnifying glass—and Audette is totally blind. The sisters took out a mortgage to buy the house fully from two other siblings and planned to use the remainder ($117,000) to fix up the home. In 2001, the mortgage was sold to Bank of New York. Fairbanks Capital Corp. was the mortgage servicer.
"Unfortunately under the current system, if the lender wants to sell the mortgage, the borrower simply can't prevent it and often doesn't know about it," Connecticut Attorney General Richard Blumenthal says in an interview.
DeGoursey was told to begin paying Fairbanks in April 2001. All went well until Sept. 2002, when Audette was married and the sisters and their husbands went on a honeymoon together. The September mortgage "got away from me," admits DeGoursey.
"When I sat down to pay for October, I realized I hadn't paid September," she says. She called Fairbanks to work out a payment plan—exactly what the state Department of Banking suggests people do when they miss a payment—but she was told she was already in foreclosure.
Fairbanks claimed they'd missed the March 2001 payment, even though the first payment to Fairbanks wasn't due until the following month. Fairbanks said they'd missed two payments and now the full amount of the loan was due, or else.
Fairbanks and the DeGourseys worked out a payment plan, but Fairbanks filed for foreclosure on their home anyway. The sisters managed to keep the family home, for the time being, because they had signed a forbearance agreement that said Fairbanks couldn't take their home if they made their monthly payments.
Meanwhile, in 2003 the Federal Trade Commission and the Department of Housing and Urban Development sued Fairbanks for violating the Fair Debt Collection Practices Act. The FTC said Fairbanks was unfairly adding $50 late fees to payments made on time (the DeGourseys paid several unnecessary late fees), was forcing clients to buy insurance through them (the DeGourseys were paying an extra $84 a month for Fairbanks' insurance), and was loaning clients money for the insurance and then collecting interest on that loan. They miscalculated bills and refused to break down and explain costs to customers, regulators said. In 2003, the class action lawsuit was settled, with Fairbanks agreeing to a $40 million payout to customers. The DeGourseys got $800.
But Fairbanks and the sisters continued fighting over a $2,000 rebate DeGoursey was owed for overpayment. The sisters stopped paying Fairbanks in protest and the loan went into default. Fairbanks again pressed foreclosure and forced the sisters out. The house was sold to Bank of America for $177,115 and is still on the market.
"We had to pack up a house of 54 years, being blind and sick," says DeGoursey, who's now living in an apartment in New Haven. "You don't know what that's like."
After the FTC lawsuit Fairbanks changed their name to Select Portfolio Servicing with the same phone number, address and a lot of the same executive staff. Connecticut's Department of Banking has already received six complaints about Select Portfolio since the start of 2007, says consumer affairs manager Carmine Costa, including payoff disputes, collection practices and billing errors—all problems cited in the FTC lawsuit against Fairbanks.
Blumenthal's office has heard the same, and is already investigating Select Portfolio—part of a larger investigation into the mortgage industry—for improper fees, inflated home appraisals and other "deceptive practices."
Utah-based Select Portfolio did not return a call seeking comment for this story.
On a positive note, however, both Blumenthal and the Banking Department say they've been able to get reimbursements for consumers from Select Portfolio without having to file lawsuits.
Too late for JoAnn DeGoursey and Linda Audette.