It's been a six-year battle for Mike Dillon, who is trying to save his home from a foreclosure the courts say should never have happened.
It began in 2001, when the company servicing Dillon's loan was sold. According to Dillon, he made a payment in 2001 to his servicer, but it had been sold to Fairbanks Capital, Dillon said. Fairbanks told him his payment was not received.
"The payment disappeared," said Dillon of Manchester, N.H. "The check never came back to me, and the first notification that I ever got from Fairbanks was a default notice saying that you owe us $2,000 plus. From there it was all downhill."
Dillon admits to paying late but said he always paid the late fees. He contends he landed in loan default and on the doorstep of foreclosure because of deception by Fairbanks Capital.
In 2005, a New Hampshire judge barred Fairbanks from foreclosing on Dillon's home, saying that Fairbanks created a "predatory scheme of penalties that generated the default." Dillon said that while the ruling helped keep his house safe for now, he ultimately didn't consider it a victory.
"It didn't make up for the years of illegal fees they charged me," Dillon said. "It didn't make up for the damage to the credit report, it didn't make up for anything."
Fairbanks disagreed with the court's ruling, but said it complied. Still, the company said, Dillon has refused to pay into a mandated escrow account, leaving him behind on years of mortgage payments, taxes, and insurance. He remains locked in litigation with the company.
Fairbanks has been sued before. In one case in 2003, the company voluntarily agreed to a $40 million settlement with thousands of Massachusetts customers, after the Federal Trade Commission and the U.S. Department of Housing and Urban Development said the company "assessed and collected improper or unwarranted fees."
The FTC charged the company with failing to post mortgage payments on time, then charging customers late fees; charging customers for homeowner's insurance when the homeowners already had a policy in place; and misrepresenting the amounts customers owed.
Since the settlement, the company was sold, changed management, and changed its name to Select Portfolio Servicing, or SPS. It says it's now a leader in responsible servicing.
But many homeowners continue to find themselves in the same situation with their servicers. Some of them file for Chapter 13 bankruptcy, which protects them from creditors while allowing time to restructure their debt.
Bankruptcy Boot Camp
Attorney Max Gardner said bankruptcy courts have become an unlikely ally in exposing loan-service abuse.
At his idyllic rural retreat set in the gently rolling hills of western North Carolina, lawyers from around the country come to Gardner's estate northwest of Charlotte to learn how to dissect their client's records -- rooting out the hidden fees mortgage servicers charge. Those fees can add up to tens of thousands of dollars and according to Gardner, are not only unreasonable but sometimes illegal.
"The fees are unreasonable fees, they're unnecessary fees, they're improper fees, and I'm saying they're illegal fees because they're not approved by the bankruptcy courts," said Gardner. "The problem with these fees is that, you know, they're secret fees, they're secret charges."