Litigation Worries.

If you haven't had a "litigation checkup" recently, now might be a good time to think about having internal and external attorneys take a look at your loan servicing practices. Nobody likes having lawyers meddle with established business practices, but the case of Fairbanks Capital demonstrates just how much trouble you could be in if politicians, regulators and, perhaps worst of all, class-action attorneys set their sights on your company.

Congress is considering legislation that could increase penalties for loan servicers that run afoul of regulatory requirements or loan documents. News media are expanding the definition of "predatory lending" to include aggressive collection practices. And the plaintiffs counsel industry smells blood. You can bet, especially in the subprimne mortgage world, that lenders will face increasing scrutiny of their customer service and collection practices.

The original furor over "predatory lending" focused on the misdeeds of only a few loan originators. It's not hard to see how a few horror stories, involving borrowers who lost their homes because of reckless or negligent loan servicing, could stir up a hornet's nest of angry homeowners, consumer activists and regulators. That would be bad ...