By Charlene Crowell
Consumers harmed by Green Tree Servicing, LLC, a major mortgage servicer, won an important victory. Joint enforcement actions by the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) resulted in a return of $48 million to affected borrowers and a $15 million civil penalty fine, together totaling $63 million.
According to financial regulators from 2010-2014, Green Tree Servicing, LLC, mistreated mortgage borrowers who were trying to save their homes from foreclosures. The litany of charges reads like a financial nightmare for troubled homeowners:
• Misrepresentation of monies consumer owed or the terms of their loans;
• Failure to honor mortgage modifications made by earlier servicers;
• Sharing borrowers’ debts with employers and/or other third parties;
• Failure to investigate disputes before continuing collections;
• Threats of arrest, imprisonment, property seizure, and wage garnishments; and
• Calling borrowers and leaving voice mails at their homes and workplaces as early as 5:00 am and as late as 11:00 pm.
“Green Tree failed consumers who were struggling by prioritizing collecting payments over helping homeowners,” said Richard Cordray, CFPB director. “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.”
Sharing Director Cordray’s concerns, Jessica Rich, director of the FTC’s Bureau of Consumer Protection added, “It’s against the law for a loan servicer to lie about the debts people owe, or threaten and harass people about their debts.”
The irony is that Green Tree ‘specialized’ in servicing delinquent loans and took pride in being known as a “high touch” servicer. Nationwide, the firm ‘touched’ its borrowers; but in all the wrong ways.
In addition to the ills cited above, Green Tree was also charged with pressuring consumers to make payments to a third-party service that charged a $12 ‘convenience fee’ for every transaction. Some consumers were told that they had to use the service to avoid a late fee.
Other consumers who knew they were late in their mortgage payments were charged up-front payments, even for programs that banned upfront charges. Even borrowers who attempted to avoid foreclosures via short sales encountered unexplained delays up to six months, despite having been promised quicker actions.
“It is unfortunate to learn that these servicing ills,” said Paul Leonard, senior vice-president for federal policy at the Center for Responsible Lending. “No one deserves financial exploitation – particularly when it involves the single, largest investment many consumers make in a lifetime. Yet it is also an encouraging sign that joint enforcement actions can hold these services accountable.”
The enforcement actions are also a reminder that while consumers choose which lender to finance their home, they have no choice in selecting their servicer. And as with borrowers being serviced by Green Tree, it can be a costly difference.
In years gone by, many lenders also serviced their loans. Parents and grandparents typically received their mortgage from the same bank that held their checking and savings accounts. Customers knew their bank and trusted it to be fair and accurate.
The nation’s foreclosure crisis shattered many consumers’ trust of lenders – in addition to marked changes in today’s financial services marketplace.
Today, few mortgages are serviced by the lender that originated the loan. Instead, most loans are bundled and sold on the secondary market as investments. In the course of selling and re-selling, a single mortgage may have several servicers.
All too often, it is only when borrowers have a mortgage problem that they discover how their loan payments have been applied or related fees assessed. As servicers change, troubled borrowers can discover that their lending records have not always been kept accurately or in their entirety.
Because of FTC and CFPB, Green Tree will also be required to take several corrective measures:
• End all servicing violations;
• Provide quality customer service;
• Honor prior loss mitigation agreements;
• Help troubled borrowers to convert pending loan modifications into permanent ones;
• Offer written options to help troubled borrowers keep their homes, including those in which foreclosures have not yet been completed; and
• Create a detailed data integrity programs that tests, identifies and corrects errors in transferred loans.
What CFPB and FTC have ordered in Green Tree’s enforcement really reads like a best practices handbook. Here’s hoping other mortgage servicers will take note.
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.firstname.lastname@example.org.