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Clevelanders want to stop a notorious mortgage company. The state of Ohio won't help.

Barbara Anderson watched the switchboard light up at - the mention of Fairbanks. - WALTER  NOVAK
  • Walter Novak
  • Barbara Anderson watched the switchboard light up at the mention of Fairbanks.

When activists from the East Side Organizing Project first mentioned Fairbanks Capital on the air, they were broadcasting from a relatively obscure AM gospel station, on a Sunday at 7 a.m.

They hadn't even planned to mention Fairbanks. They were talking about mortgage fraud when someone used the Salt Lake City firm as an example, says ESOP co-chair Barbara Anderson.

The switchboard instantly lit up. Call after call, "All they wanted to talk about was Fairbanks and their problems with it," she says. Even the radio technician got into it: "He told us his loan was serviced by Fairbanks, and he'd had problems." By Monday, the group's voice mail logged more than 50 messages.

ESOP has earned its ferocious reputation by targeting banks for abandoning the inner city and mortgage brokers for preying on it. It's had real success, including a campaign against Charter One that resulted in the opening of a new branch. But the reaction to Fairbanks was more fervent than anything its leaders had seen.

The groundswell was even more dramatic, considering that Fairbanks doesn't have brokers or local offices. It merely buys existing mortgages in bulk and collects the monthly payments -- not a task that typically lends itself to outrage.

But if the desperate calls were any indication, the company's practices were far from routine. Callers related horror stories: They'd been paying their mortgages without incident until Fairbanks bought their loans. Suddenly, the company claimed their checks weren't arriving on time. Or at all. Then it tacked on late charges and property-inspection fees. Or it refused to take their payments. The next thing they knew, they were thousands of dollars behind, their homes in foreclosure. (Fairbanks spokesman Brian Keeter declined comment.)

Johnnie Mae Bivins of Akron had never been delinquent before her mortgage was sold to Fairbanks, according to her daughter, Gloria. Then, although Bivins mailed her checks on the 4th or 5th of every month, Fairbanks claimed they weren't arriving until after the 11th and slapped her with late fees.

"They told me I should mail checks two weeks ahead of time, so they could be posted on time," Gloria Bivins says. "Well, the checks were there -- but they were lying on someone's desk." Johnnie Bivins's debt swelled with hundreds of dollars of late charges.

As a single mother, Catherine Haynesworth sometimes took on a second job to stay current on her mortgage. She thought she was in good shape. But in July 2001, Fairbanks claimed that she'd missed two payments back in 1999. A terse phone call announced that she was in foreclosure and that the company was returning her most recent check.

Haynesworth filed for bankruptcy to stop the foreclosure. But she insisted that she hadn't missed the payments, even offering a receipt from Western Union as proof. Finally, she says, the company admitted to receiving the payments. But it is still charging her $20,000 for its foreclosure filing costs.

"I said, 'I'm not going to do it,'" she says. "They're the ones who are at fault. And my life has been totally screwed up. My credit's been totally screwed up." She's already paid her attorneys $5,000: "And they didn't do anything but show up in court!"

Viewed as isolated cases, people like Bivins and Haynesworth would be easy enough to dismiss. Plenty of homeowners fall behind on mortgages; many are only too eager to blame the mortgage company. But the complaints ESOP heard were eerily similar.

Indeed, Fairbanks' practices have gained national attention. A website calling the company "America's Poster Child for Mortgage Abuse" linked complainants across the country. (Thanks to a Fairbanks lawsuit, the site now offers general advice on dealing with mortgages instead of excoriating the company.) After a Baltimore TV station detailed the allegations, U.S. Senator Barbara Mikulski contacted the feds. The Federal Trade Commission launched an investigation.

At a meeting with ESOP in August, commission attorney Allison Brown noted that her agency has prosecuted other mortgage companies on similar charges, such as failing to post payments promptly and charging fees not allowed in the original mortgage contract.

But while the feds scrutinize Fairbanks, ESOP believes that more than 200 Fairbanks foreclosures are already pending in Cuyahoga County.

At the group's urging, company officials agreed to halt foreclosure temporarily for Greater Clevelanders completing a standardized form detailing their complaints. To date, ESOP has collected 137, but they believe more victims exist. "There are thousands of people who don't have ESOP and don't know where to turn," says Anderson.

That's where the politicians come in. In other states, the government has intervened on behalf of homeowners. Maryland pressured the company into issuing a moratorium on all foreclosures. In West Virginia, a circuit court judge blocked 260 Fairbanks foreclosures.

But Ohio has long been considered a safe haven for predatory lenders. A popular adage among fair-housing types is that Ohio grants more protection to people buying toasters than to those signing mortgages.

State agencies seem to have taken that idea to heart. Bill Teets, a spokesman for the Ohio Department of Commerce, says his agency has little jurisdiction over mortgage servicers. David Oppenheimer, a representative for Attorney General Jim Petro, claims much the same.

"Mortgage lenders are exempt from the Ohio Fair Trade Practices Law," he said at an ESOP meeting in August. "We can't enforce laws that aren't on the books." Petro's office did not return numerous calls for comment, but Oppenheimer may have a point: Even the state's new predatory-lending law lets the attorney general get involved only after a county prosecutor has passed on the case.

Protestations aside, Petro isn't powerless. A clever attorney general could certainly build a civil case against the company or team up with the county for a criminal prosecution. Perhaps even better would be emulating his counterpart in Maryland and using the bully pulpit to pressure the company into a foreclosure moratorium.

Still, Petro's inactivity shines in comparison to Governor Bob Taft's. Both Petro and the Commerce Department sent representatives to an ESOP meeting. But though the group bombarded Taft with dozens of phone calls, he failed to show. Nor did he send a member of his staff or even an expression of interest.

Taft Spokesman Orest Holubec says he's not aware of the problems with Fairbanks and suggests that homeowners put complaints in writing or contact the Department of Commerce. When told that the department has claimed no jurisdiction, he suggested they call legislators to urge changes in the law. But thus far, the legislature has shown no interest in fighting predatory lending -- and even went so far as to ban cities from doing it on their own.

ESOP could use a push from the state. Its efforts are sputtering: A Fairbanks representative promised concessions in August, only to backpedal almost immediately. The rep promised to halt foreclosures for 90 days for anyone completing the complaint form; in September, Fairbanks decreed that the delay would last 30 days, period. In August, the rep vowed to make an agreement with ESOP in writing; in September, Fairbanks decreed that no written partnership was necessary.

It's not a bad strategy: There's no need for Fairbanks to acquiesce if government isn't watching.

It's time for the politicians to step up, Anderson says. "We're not looking for them to do more," she says. "We're looking for them to do something."

More by Sarah Fenske

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