Fraud Watch: Company To Pay For Mortgage Practices

by Alan Marx

In business, sometimes a company has good days and sometimes it has bad ones.  It is worse for the company when the bad ones are self-inflicted.

Friday, April 17, 2015, was a good day for Walter Investment Management Corp.  The company announced that its wholly owned subsidiary, Green Tree Servicing LLC (“Green Tree”), had received a superior Five STAR designation under the Fannie Mae (“FNMA”) Servicer Total Achievement and Rewards (“STAR”) program for 2014. The STAR program measures participating servicers on overall STAR performance including customer service levels and foreclosure prevention activities.

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Four days later, Tuesday, April 21, 2015, was not a good day for the company.  Housing Wire reported that the Consumer Financial Protection Bureau (CFPB”) and the Federal Trade Commission (“FTC”) accused Green Tree of “mistreating borrowers” who were attempting to save their homes from foreclosure.   “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, including the following, when servicing loans that it acquired from other servicers:

• failed to honor loan modifications that consumers had entered into with their prior servicers and insisted that consumers pay their original, higher monthly payment;

• failed at times to get the information and documentation from the prior servicer that it needed to accurately collect payments from consumers;

• 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, such as the borrowers’ employers;

• from 2010 to 2014, engaged in illegal debt collection practices, such as calls from Green Tree’s collectors to 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; leaving many voicemails on the same day; unlawfully threatening consumers with arrest or imprisonment, seizure of property, garnishment of wages, and foreclosure; using loud and abusive language; calling consumers “deadbeats;” mocking their illnesses and other struggles; yelling and cursing at them;

• 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;

• taking payments from some consumers’ bank accounts without their consent;

• demanding payments before providing loss mitigation options;

• automatically routing delinquent consumers who called Green Tree to a debt collector, and providing no way for consumers who wanted to speak with a customer service representative or a loss mitigation specialist rather than a collector; and

• sometimes telling consumers they had to make a loan payment before they could be considered for a loan modification.

According to the CFPB and the FTC, consumers did not need to make payments on their loans before they could be considered for a loan modification, because the Home Affordable Modification Program, in which Green Tree participated, does not allow participating servicers to require consumers to make payments before considering them for loan modifications.

Green Tree often acquired customers who already had an agreement with their previous servicer to modify their loans, and when it did, Green Tree failed to consistently honor the already in-process modifications with the prior servicers.  Green Tree, in many instances, allegedly insisted that consumers pay the old, higher mortgage payments.

The agencies said that Green Tree’s short sale department was frequently unreachable and unresponsive, at times taking from two to six months to respond to requests from consumers for short sales. These delays put the consumers at risk of the loss of potential buyers and cost consumers other loss mitigation opportunities.

To settle the agencies’ claims, Green Tree agreed to pay $48 million in restitution to victims and $15 million to the CFPB’ Civil Penalty Fund.   It agreed to the settlement "without admitting or denying any allegations."

Under the terms of the settlement Green Tree also is required to ensure the accuracy and completeness of data and other information about consumers’ accounts before servicing them; cease collection of amounts in dispute 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; have 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.

Conclusion
The mortgage service industry should be held to a high standard, particularly given the terrible mortgage abuses that led to financial crisis in recent years.  Abusive mortgage practices deserve the attention of the consumer protection enforcement agencies.