Fairbanks CEO Eager to Reenter Servicing Market
American Banker
New York, N.Y.
May 14, 2004


It looks like Jim Ozanne can start smiling again. Since taking over for the ousted

Tom Basmajian a year ago as the chief executive of Fairbanks Capital Corp.,

Mr. Ozanne has been rehabilitating the struggling subprime servicer while dealing

with a year of continually bad news.

But last week he got the nod from Wall Street to resume bidding for business.

Standard & Poor's Corp. restored Fairbanks' servicer rating to "average" about a

year after downgrading it to "below average."

That upgrade, and a similar one by Moody's Investors Service Inc. last
month, will allow Fairbanks, once the top subprime servicer, to rebuild
a portfolio that has shrunk since last year's downgrades, Mr. Ozanne said
in an interview Monday. "We're extremely pleased and amazed we can
reenter the marketplace," he said. "We are planning to go back into bidding
for and purchasing subprime servicing and subservicing and soliciting special
servicing."

Last year's downgrades came amid a government investigation in which
Fairbanks was accused of overcharging borrowers and offering extremely
poor customer service. Since then, Mr. Ozanne said, Fairbanks has "been
running off" its portfolio, which once had almost $50 billion of loans
but now has about $30 billion. The Salt Lake City company plans to
capitalize on strong mortgage- backed securities issuance to rebuild the
portfolio quickly, he said.

"There is pretty significant issuance coming out of [Wall Street players
such as] Lehman Brothers, Credit Suisse, Greenwich Capital, and Deutsche
Bank," he said. "All those folks are originating into their conduits and
looking to sell their servicing."

It is too late to do much bidding for servicing this quarter, Mr. Ozanne
said. "We probably won't do any business in the second quarter, as it's
pretty far along." But Fairbanks plans to buy servicing rights for
"a couple hundred million" dollars of loans next quarter, and "several
billion" more the following quarter, he said. By yearend it should be able
to "stabilize the portfolio" so it can add "as much as we are seeing in
the way of runoff," he said.

Next year "we would expect to start" expanding the portfolio, at a rate
of 10% to 15% a quarter, Mr. Ozanne said. By the end of next year it plans
to have a servicing portfolio of between $33 billion and $35 billion.

Jeffrey Levine, a managing director at Milestone Merchant Partners LLC
in Miami, called the plan realistic.

"With interest rates rising, runoffs should slow from a refi standpoint,"
and when rates rise, "subprime originations improve," Mr. Levine said.
"There will be a lot more [servicing] available" to buy, "and that should
play into their strategy."

Neither S&P nor Moody's have raised Fairbanks' rating to "above average,"
because the company is not out of the woods on a number of fronts.
It is still fulfilling the terms of a settlement it agreed to last fall
with the Department of Housing and Urban Development, the Federal Trade
Commission, state attorneys general, and class-action lawyers.

As part of the settlement, Fairbanks has made its practices more consumer-friendly
and has created a $40 million fund to pay aggrieved borrowers, though the
payments have not been completed, Mr. Ozanne said. It has also reached
agreements with class-action attorneys in a number of states for much of
the $15 million it pledged to pay them as part of the government settlement.
The U.S. District Court for Massachusetts approved those agreements Wednesday.

Fairbanks also has to refinance its "lines of credit that relate to
its servicing advances," Mr. Ozanne said. He expects to have that done
in July.

Mr. Ozanne, 60, who was a Fairbanks director before becoming its chief,
is known as a turnaround specialist. Before joining Fairbanks he was the
chairman of Source One Mortgage Corp., which he steered from a loss in
1996 to a return on equity exceeding 24% in 1998, according to a press
release. Citicorp Mortgage bought Source One the following year.

Before joining Source One he had been the chairman and chief executive
of Nations Financial Holdings Corp. and, still earlier, an executive vice
president at GE Capital.

Despite his optimism, Mr. Ozanne spoke about the future like someone
who had been through the wringer; he predicted that the subprime servicing
industry's woes are not yet over.

"Consumer activists are always going to be looking for more and more
support for their borrowers who are troubled," he said. "With interest
rates rising, it's going to make it more difficult for borrowers in general,
especially those who borrowed at a floating rate," to make their payments.
"Regulators are going to be watching very closely for those who are
not complying" with acceptable servicing standards, Mr. Ozanne said. "We
will be able to make that compliance and are optimistic about the future,
but I don't think the world has gotten any easier."