The Consumer Financial Protection Bureau and the Federal Trade Commission announced Tuesday that the organizations are taking action against Green Tree Servicing, a subsidiary of Walter Investment Management Corp. (WAC), for “mistreating borrowers” who were attempting to save their homes from foreclosure.
According to the CFPB and the FTC, Green Tree failed to honor modifications for loans transferred from other servicers, demanded payments before providing loss mitigation options, delayed decisions on short sales, and harassed and threatened overdue borrowers.
Recently, Green Tree received a superior five STAR designation as part of Fannie Mae’s Servicer Total Achievement and Rewards program for 2014. As part of the agreement, Green Tree agreed to pay $48 million in restitution to victims, and a $15 million civil money penalty to the CFPB’s Civil Penalty Fund for its illegal actions, the CFPB said.
"We believe this resolution is in the best interest of Green Tree, our consumers, our clients and our shareholders," said Mark O'Brien, chairman and ehief executive officer of Walter Investment. "As a company, we have been and continue to be committed to properly serving homeowners and helping them remain in their homes. We continue to develop and deploy best practices in our servicing operations and believe these standards will serve us well as we partner with our consumers to support them in their goal to achieve sustainable homeownership.
"With this settlement, the company and our employees will maintain our focus on the continuous improvement of our procedures and practices which will benefit all consumers and all stakeholders," O'Brien continued. "We will continue to work closely with regulators, clients and other constituencies to ensure that we maintain the significant alignment of interests that exists in the mortgage servicing industry."
Green Tree added that it has agreed to the terms of the settlement, "without admitting or denying any allegations."
Green Tree revealed that it was the subject of a pending investigation by the CFPB and the FTC in a November filing with the Securities and Exchange Commission.
“Green Tree failed consumers who were struggling by prioritizing collecting payments over helping homeowners,” CFPB Director Richard Cordray said. “When homeowners in distress had their mortgages transferred to Green Tree, their previous foreclosure relief plans were not maintained. We are holding Green Tree accountable for its unlawful conduct.”
According to the CFPB and the FTC, Green Tree engaged in illegal practices when servicing loans that it acquired from other servicers.
Per the details of the complaint filed by the CFPB and the FTC, Green Tree failed to honor loan modifications that consumers had entered into with their prior servicers and insisted that the consumer pay their original, higher monthly payment.
Green Tree also failed at times to get the information and documentation from the prior servicer that it needed to accurately collect payments from consumers, the CFPB and the FTC said.
According to the CFPB and the FTC, Green Tree also demanded payments before providing loss mitigation options, delayed decisions on short sales, and resorted to illegal practices to collect mortgage payments from consumers who fell behind on their loans, including false threats, repeated calls, and revealing debts to third parties, like the borrowers’ employers.
The CFPB and FTC provided more details on the charges against Green Tree. Below are the charges against Green Tree, in full. According to the CFPB and the FTC, from 2010 to 2014, Green Tree:
Engaged in illegal debt collection practices: According to the FTC and the CFPB, Green Tree’s collectors called consumers who were late on mortgage payments many times per day, including at 5 a.m. or 11 p.m., or at their workplace, every day, week after week, and left many voicemails on the same day. They also unlawfully threatened consumers with arrest or imprisonment, seizure of property, garnishment of wages, and foreclosure, and used loud and abusive language, including calling consumers “deadbeats,” mocking their illnesses and other struggles, and yelling and cursing at them. The company also allegedly revealed debts to consumers’ employers, co-workers, neighbors, and family members, and encouraged them to tell the consumers to pay the debt or help them pay it. The complaint also alleges that Green Tree took payments from some consumers’ bank accounts without their consent.
Demanded payments before providing loss mitigation options: Delinquent consumers who called Green Tree were automatically routed to a debt collector. The CFPB and FTC allege that consumers who wanted to speak with a customer service representative or loss mitigation specialist rather than a collector found that there was no way to do so and were sometimes told that they had to make a loan payment before they could be considered for a loan modification. In reality, consumers did not need to make payments on their loans before they could be considered for a loan modification. For example, the Home Affordable Modification Program, which Green Tree participated in, does not allow participating servicers to require consumers to make payments before considering them for a loan modification.
Failed to honor in-process modifications: Because Green Tree was rapidly expanding its mortgage servicing business, it often acquired customers who already had an agreement with their previous servicer to modify their loans. The complaint alleges that Green Tree, in many instances, failed to honor these agreements and insisted that consumers pay their old higher mortgage payment.
Delayed short sales: Green Tree’s short sale department was frequently unreachable and unresponsive. The complaint alleges that in numerous instances, Green Tree took two to six months to respond to consumer requests for short sales. This could have cost consumers potential buyers, and it may also have cost them other loss mitigation alternatives while their short sale requests were pending.
Used deceptive tactics to charge consumers convenience fees: The CFPB and the FTC allege that Green Tree deceived consumers to get them to pay $12 for its pay-by-phone service, called Speedpay. Green Tree representatives would pressure consumers to use the service by telling consumers that Speedpay was the only available payment method to ensure the payment would be received on time. In fact, Green Tree accepted other payment methods that do not involve a fee, such as checks and ACH payments, which consumers could have used to make a timely payment.
Under the terms of the enforcement action, Green Tree is required to pay $48 million to thousands of consumers whose loan modifications were not honored, who had their short sales decisions delayed because of Green Tree’s poor servicing, or who were deceptively charged convenience fees when paying their mortgage. Borrowers who receive payments will not be prevented from taking individual action on their claims as a result of this settlement.
Additionally, Green Tree is required to:
- Establish and maintain a comprehensive data integrity program to ensure the accuracy and completeness of data and other information about consumers’ accounts, before servicing them
- Cease collection of amounts disputed by consumers until Green Tree investigates the dispute and provides consumers with verification of the amounts owed
- Meet certain loan servicing requirements to ensure that whenever Green Tree is involved in the sale or transfer of servicing rights, the buyer or transferee will honor loss mitigation agreements and properly review outstanding loss mitigation requests
- Ensure that it has enough personnel and the technical capacity to handle loss mitigation requests and respond to consumer inquiries in a timely fashion, and make its loss mitigation application available to consumers at no cost and on its website
- Implement a “Home Preservation Requirement” to provide loss mitigation options to consumers whose loans were transferred to Green Tree during the time period covered by the complaint
- Obtain substantiation for any amounts collected when consumers have in-process loan modifications, and for purported amounts due when there is reason to believe a newly transferred loan portfolio is seriously flawed
“It’s against the law for a loan servicer to lie about the debts people owe, or threaten and harass people about their debts,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Working together, the FTC and CFPB are holding Green Tree responsible for mistreating homeowners, including people in financial distress.”
A copy of the proposed consent order can be read here.
A copy of the complaint can be read here.
